Emerging risk for Asia is US recovery does not boost exports, growth

SINGAPORE - The Asia-Pacific region is facing an emerging risk that a widely-expected boost to exports from the improving US economy will fail to materialise and galvanise GDP growth, according to a new report from ratings agency Standard & Poor's. 

The report says the benefits of rejuvenated consumer demand in the US have so far been limited within its own borders. Emerging Asia's export numbers continue to disappoint two years into the recovery of the US private sector.

"An emerging risk is that the traditional trade links that transmitted US consumer demand to Emerging Asian growth may work at a longer lag. A graver risk is that the links are structurally weaker due to a permanent loss in the region's competitiveness," said S&P economist, Vince Conti.

"With Europe likely to be sluggish for years to come and China's growth moderating, a US recovery that does not generate Asian exports would necessitate a major rethink of growth strategies within the region. And that could necessitate major structural reforms to raise productivity and alter the balance between domestic consumption and savings," he said.

On the other hand, if the trade-driven recovery is merely delayed by cyclical factors, then Asian firms and households might sit tight, and possibly receive some form of monetary or fiscal stimulus if the wait becomes too long.
 
The report says that, among possible factors contributing to the absence of an export recovery so far are high levels of inventory as well as a smaller wedge in unit labour costs between the US and Emerging Asia. www.standardandpoors.com (ATI).