Japan earthquake to exacerbate Asia's slowdown
Monday, March 21, 2011; 7:35 AM
-- Japan's devastating earthquake will further slow growth in Asia, where rising oil prices and higher interest rates are already cooling an engine of the global economy, economists say.
No one is predicting a massive slowdown, but as the grim human toll of Japan's March 11 quake mounted Monday and fears of spreading radiation and prolonged power outages grew, forecasts about the economic effect of the quake also darkened.
Few economists are ready to specify just how big Asia's slump will be because of the uncertainties over Japan's Fukushima Dai-ichi nuclear plant and when power shortages - which are hitting industrial production - will be resolved.
"You are clearly not talking about reducing growth estimates by 50 percent for the region," said UBS economist Duncan Wooldridge. "It's likely to be measured in increments of maybe 25 basis points."
Moody's said that downside risks have intensified.
"We are now ... more negative in our assessment of the damage," Moody's said. "Disruptions to power - begun by the earthquake and now exacerbated by the nuclear crisis - will cause an interruption to production which is more severe than we had anticipated. Information on this aspect remains sketchy, but is almost entirely negative."
Citigroup also flagged a regional "short-term growth risk from Japan's supply disruption."
Moody's Analytics chief economist Mark Zandi said Friday that he hasn't changed his outlook for any other Asian economies, "at least not yet."
"I suspect we will make some downward revisions," he said.
Growth in East Asia was already slowing after a post-financial crisis rebound and is likely to cool further as central banks raise rates to tame inflation, the World Bank said Monday.
Its pre-quake forecast pegged regional economic growth at 8 percent in 2011 and 2012, down from 9.6 percent in 2010.
Macquarie Securities said that while the economic impact of Japan's quake across Asia is likely to be limited, regional growth will dip after a burst of trade and production in late 2010.