Strategic Intelligence for CFOs, Finance Directors, Controllers and Treasurers in Asia  | 
2012, May 18

Asia's Economic Prospects in the New Year

Home > Features > Asia's Economic Prospects in the New Year
Features

Asia's Economic Prospects in the New Year

by Cesar Bacani, 01 January 2011
topics:
Management Risk Management
tags:
2011 prospects economic forecasts GDP growth inflation interest rate

The good news for the U.S. economy came at the very end of 2010. Claims for jobless benefits fell to their lowest level in two years to 388,000 in the week to December 25, marking the first time since 2008 that the number fell below 400,000.

 
“Other data showed businesses expanded this month [December] at the fastest pace in two decades and pending home sales climbed in November for the fourth time in five months,” reported Bloomberg.
 
“Firings may keep easing as a pickup in consumer spending prompts employers to retain staff, a necessary step toward increases in employment that will sustain demand,” Bloomberg added. “Gains in business investment and exports to growing emerging economies may keep factories churning out goods in the coming year, while more jobs may also help housing stabilize.”
 
So is the U.S. – and by extension, the global economy – really on the road to full recovery in 2011? Perhaps, but expect continued stormy weather. “Batten down the hatches,” Merrill Lynch warns in its year-end global economic analysis report. “With [the U.S.] still wounded by the recent crisis and with policy stimulus nearly maxed out, the economy remains vulnerable to premature fiscal tightening, a commodity shock and a variety of other downside risks.”
 
Watching America
For CFOs in Asia trying to read the economic tea leaves in 2011, the U.S. is, of course, a key concern, particularly for companies that export there (as most Asian enterprises are, directly or indirectly) and those that have American subsidiaries. The recent spate of positive numbers is beginning to look convincing to many economists.
 
“The most significant shift in 2011 and 2012 is likely to be stronger growth in the US,” Goldman Sachs concludes in its own year-end report. Describing its outlook as “a genuine shift in view,” the investment bank has decided to raise its previous forecast for 2011 by nearly one percentage point, to 2.7%. This is higher than the consensus forecast of 2.4% by major forecasters, as tracked by macro-economics research organization Consensus Economics.
 
What has changed? “Most strikingly, the performance of underlying final demand, or ‘organic growth,’” Goldman explains. Stripping out the short-term effects of inventory swings and fiscal stimulus, the resulting core measure it terms organic growth “is now showing an impressive acceleration and seems to be on track for a 5% (annualised) growth rate in the fourth quarter [of 2010].”
 
That said, Goldman has caveats. “We are not saying that the US economy will now embark on a V-shaped recovery,” it makes clear. “We are also not saying that deleveraging is over. Indeed, private-sector debt/income ratios are still likely to decline further. But it is the pace of deleveraging – which corresponds to the level of the private-sector balance – that matters for GDP. As the pace of deleveraging slows, the private-sector balance falls, and this implies a positive impulse to GDP growth.”
 
“Finally, we are not saying that the economy will feel good from a ‘Main Street’ perspective. We only expect a gradual decline in unemployment as growth moves above trend, to 9¼% by the end of 2011 and 8½% by the end of 2012. This is still very high by any absolute standard and far above our 5½% estimate of the structural unemployment rate.”
 
In other words, Asian exporters that are counting on the return of the American consumer should temper their expectations. There may be improvement in demand, but it will be slight and not likely to goose revenues and the bottom line to a great extent.
 
123next ›last »


Related articles

Comment on this article

The content of this field is kept private and will not be shown publicly.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Allowed HTML tags: <a> <em> <strong> <cite> <code> <ul> <ol> <li> <dl> <dt> <dd> <a> <p> <span> <div> <h1> <h2> <h3> <h4> <h5> <h6> <img> <img /> <map> <area> <hr> <br> <br /> <ul> <ol> <li> <dl> <dt> <dd> <table> <tr> <td> <em> <b> <u> <i> <strong> <font> <del> <ins> <sub> <sup> <quote> <blockquote> <pre> <address> <code> <cite> <embed> <object> <strike> <caption>
  • Lines and paragraphs break automatically.
  • Use <!--pagebreak--> to create page breaks.

More information about formatting options

Verification Code
This question is for testing whether you are a human visitor and to prevent automated spam submissions.

Accounting and Regulations

CFO innovation Asia Accounting and Regulation the Asia Pacific resource center for senior finance executives, daily news, analysis, best practice and case studies in Accounting Regulation, IFRS, US GAAP, Tax, investor relations, corporate governance, Corporate Law, Financial Regulators, Internal Audit, Audit, Corporate Law.
Auditing, Investor Relations, Law and Compliance, Tax

Finance and Banking

CFO innovation Asia, Finance and Banking the Asia Pacific resource center for senior finance executives, daily news, analysis, best practice and case studies in Corporate Finance, trade finance, treasury and risk management, capital expenditure, Banking, mergers and acquisitions
Cash and Liquidity Management, Corporate Finance, Insurance, Treasury Management

Management

CFO innovation Asia the Asia Pacific resource center for senior finance executives, daily news, analysis, best practice and case studies in Finance Management, Corporate Governance, Human Resource Management, Compensation and Benefits, Mergers and Acquisitions, Professional Development, Corporate Real Estate, Risk Management, Budgeting and Forecasting, Business Process Management, Business Process Reengineering, Outsourcing.
Budgeting and Planning, Business Expense Management, Human Capital Management, Outsourcing and Shared Services, Risk Management

Metrics

Corporates, Financial Services

Technology

CFO innovation Asia Technology the Asia Pacific resource center for senior finance executives, daily news, analysis, best practice and case studies in Finance Systems, Business Intelligence, EPR, Accounting software, CRM, Cloud Computing, Telecommunications, Business Process Outsourcing, Business Process Management Software.
Business Intelligence, Enterprise Software and Systems, Financial Systems, Security