ASIA, THE US FISCAL CLIFF AND THE EU RECESSION

NO NEW YEAR CHEER FOR ASIA

Morgan Stanley Research says China needs to initiate stru ctural reforms to transition towards higher valued-added economic activities, accelerate the fiscal transfers towards social security and boost private consumption.

Fintang Ng

The Star, November 17, 2012

THE outlook for Asia's economies remain very much in the balance even as growth momentum bottomed out in October with an improvement in external demand, purchasing managers indices and factory output.

Growth continues to be weighed down by concerns over the looming US fiscal cliff (simultaneous tax increases and spending cuts mandated by law to rein in the budget deficit) and the recession in Europe.

External demand remains under pressure despite the recent improvement seen in data for September and October across the region while domestic demand, although resilient, is starting to feel the impact of slower growth.

Citigroup Inc's Asia-Pacific chief economist Johanna Chua cautions that the rebound for the region will be mild in the fourth quarter and going into 2013 because Chinese policymakers are unlikely to come up with any fresh stimulus beyond what has been factored in for the year while business sentiment will be clouded by concerns over political risks arising from the US fiscal cliff.

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