MANILA — Asia is starting to feel the pinch from Europe’s financial crisis, with growth slowing down in key economies, but the region still hopes to remain the world’s growth engine. Warnings that the eurozone debt crisis and the sluggish recovery in the United States would drag down Asia’s performance became real on Friday when China announced that its gross domestic product (GDP) growth fell to 7.6 percent in the second quarter — the slowest in three years for the world’s second-largest economy. Singapore’s economy contracted by 1.1 percent in the same period, largely due to a 6-percent decline in manufacturing output. India — which together with China, leads the economies in the region — is also expected to suffer a slump in growth this year, with the Asian Development Bank projecting annual GDP to moderate to 6.5 percent in 2012, down from an initial estimate of 7 percent. Aside from suffering from weak exports, top economies in the region are also seeing retail sales drop, such as in Hong Kong where revenue between January and May was 13.5 percent up year-on-year, a slowdown from the 24.9-percent annual growth posted a year earlier.
“We are still struggling with the North Atlantic financial crises and global trade depression that started five years ago this month,” said David O’Rear, chief economist at the Hong Kong General Chamber of Commerce. “Hong Kong is most probably in recession, right now.”
Asia also has a role as an importer. The latest figures from Beijing have rattled Australia, which sends more than a quarter of its exports to China. The news sparked fears that Australia’s output growth, which stands at 2.2 percent in the 12 months to July, will now undershoot the 3.1-percent the Organization for Economic Cooperation and Development was predicting for the current financial year to the end of June 2013. The signs of a slowdown are already there: an unemployment rate rising to 5.2 percent from 5.1 percent after 27,000 jobs were shed in June; big mining firms putting fresh projects on hold; and retail figures hard hit by a collapse in consumer confidence. The central bank has already dropped interest rates since November, and has signaled it may cut further to ward off a recession.
But Juzhong Zhuang, deputy chief economist of the Manila-based Asian Development Bank, said the region would still be the biggest contributor to the global economy despite flagging growth. “More than half of the global GDP will still come from Asia,” he told dpa on Friday. “Globally, we do not see a recession but there are risks, the biggest of which is the eurozone crisis. Our assumption is that the eurozone crisis will not spread into a global crisis.”