Goldman Sachs Lowers Asian Growth Prediction

by Mary Swire, for LawAndTax-News.com, Hong Kong

17 January 2008

Investment bank Goldman Sachs has painted a gloomy economic picture for Asia over the coming year, in a report published this week.

According to predictions in the report, Asia (excluding Japan, which has also seen its growth forecast cut) is expected to grow 8.3% this year, and 8.5% in 2009, revised down from 8.6% in both cases.

The ongoing economic crisis in the United States, which many fear will tip the country into recession, is the major factor behind the revised growth estimates, and reports in the regional and international media this week have revealed a slowing of demand for the hi-tech exports upon which countries such as South Korea and Taiwan rely.

The continuing US decline is also causing grave concern in Japan, which according to observers finds itself similarly placed to the United States, with recession a distinct possibility.

Signs that China may be succeeding in cooling expansion at just the wrong time for the global economy are additionally being reported. Goldman this week revised China's growth estimate down to 10% (from a forecast 10.3% previously).

The People's Republic is also, of course, feeling the chill from the United States, and speaking on Tuesday to Bloomberg, a Goldman Sachs senior economist observed that:

"Given the significant contribution to growth from net exports, a meaningful slowdown in global demand triggered by a US recession would surely have a visible impact on China's growth and corporate profitability."

Although the investment bank went on to drop Indian growth estimates for 2008 from 7.8% from 8%, it reportedly suggested that weaker regional economic links, increasing urbanisation, and higher levels of savings and investment, could combine with other factors to cushion the country's economy somewhat.

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