Asia can withstand fallout of Greece exit from euro: Economists
Economies in Asia, including Thailand, are ready to withstand a possible shock if financially troubled Greece exits the euro, economists said.
Asia was not immune to a crisis but Asian countries’ economies were ready to deal with a likely shock from Europe with some fiscal room for economic stimulus as their public-debt levels were relatively low, said Tai Hui, regional head of research for Southeast Asia at Standard Chartered Bank.
“Europe’s debt crisis has become a major threat to Thailand’s economy but Thailand has both monetary and fiscal space to deal with the economic situations,” Paiboon Kittisrikangwan, assistant governor at the Bank of Thailand, said separately at the BOT.
Inconclusive first-round elections in Greece have deepened concerns whether the nation will exit the euro.
Standard Chartered sees Europe’s worsening sovereign-debt crisis as the most immediate concern. Other concerns include China’s economic slowdown and the fragile US recovery.
The bank projects three scenarios for Europe’s debt crisis.
“The first scenario is kick the can through,” meaning that Greece remains in the euro and Asia sees a slowdown in the first half of this year, Hui said. There could be a pickup in growth in the second half, however, below Asia’s long-term average.
The second scenario sees Greece’s exit from the euro and the impacts from a contagion are managed and contained. “We can grow with a V-shaped rebound,” Hui said.
The last scenario assumes the worst with Greece’s exit, and European authorities not providing sufficient support. In this case, the contagion is not contained and more countries may be forced out of the euro.
If the worst-case scenario occurs, Asia will likely face the same situation as after the bankruptcy of Lehman Brothers, Hui said.
“We expect that European authorities will do the right thing to limit the contagion impact from a possible Greek exit,” Hui said.
The issue for Europe was not the banking crisis, but about growth and jobs, said deputy managing director at International Monetary Fund, Naoyuki Shinohara, speaking at the World Economic Forum on East Asia last Thursday.
