Hong Kong: Asia should be the first region to recover from global recession, thanks to the consumption power of its growing middle class, Sandy Flockhart, Asia-Pacific head of banking giant HSBC said on Thursday.
“The bad news is we are experiencing a severe global economic downturn. Global GDP should shrink in 2009,” Flockhart told a conference in Hong Kong.
“China and India continue to have high growth rates. The good news is that this region will be the first to recover from the crisis,” he said, citing a growing middle class as one of Asia’s stronger characteristics.
Flockhart’s view contrasts with that of IMF managing director Dominique Strauss-Kahn, who said last week that Asia would not pull through the global economic downturn on its own.
Asian exports have plunged at double-digit rates in the past month as a result of weaker European and American consumer spending.
China on Wednesday reported an unexpectedly sharp 17.5% drop in January exports, the steepest decline since records began in 1993. Weak exports have pushed Japan, Hong Kong and Singapore into recession and economists say Taiwan and South Korea are heading for recession.
Economic development in emerging Asia, however, is boosting the number of medium-income households and the region is relying on them to spur consumer spending and offset the export slump.
Flockhart said sweeping measures by governments around the world to stimulate growth were positive moves.
China believes it can still achieve 8% economic growth this year, helped by a 4 trillion yuan ($585 billion) fiscal stimulus package announced late 2008.
India expects its economy to grow by 7.1% in 2008/09, a six-year low, and has also introduced fiscal measures, but Planning Commission deputy chairman Montek Singh Ahluwali said this week that further stimulus would be needed to sustain growth.