HONG KONG\u2014First, the International Monetary Fund (IMF) warned developing Asia to brace for shocks from the West. Then the Asian Development Bank (ADB) slashed its regional growth forecasts. Now analysts are asking: Has Asia lost its mojo?
\nThe European debt crisis and weakness in the United States have long been drags on Asian growth, but throw in China\u2019s difficult leadership transition and the outlook is grim.
\n\u201cIt wasn\u2019t supposed to turn out like this. Growth in recent months has faltered again, confounding expectations of a gradual recovery,\u201d HSBC economists Qu Hongbin and Frederic Neumann wrote in a report released last week.
\n\u201cChina is one culprit, though a wobbly West is equally to blame,\u201d they said.
\nAs Asia\u2019s powerhouses China and India slow faster than many had expected, the ADB on Wednesday revised down its growth estimates for the region\u2019s emerging economies to the lowest level since 2009.
\nEchoing assessments from the IMF, the ADB also warned of significant risks arising from the eurozone and the uncertain recovery in America, both of which are major export markets for Asian manufacturers.
\n\u201cDeveloping Asia is slowing down much more than we expected,\u201d ADB chief economist Changyong Rhee told reporters in Hong Kong.
\nEnd of two-digit growth
\n\u201cThe years of two-digit growth in Asia are coming to an end,\u201d he said.
\nThe bank cut its 2012 growth forecast for developing Asia, which comprises 45 nations, from 6.9 percent in April to 6.1 percent\u2014the lowest since 2009 when the region expanded 6 percent.
\n(The ADB raised its growth outlook for the Philippines from 4.8 percent to 5.5 percent this year, citing the rise in investments by local firms, robust household consumption and increase in government spending. For next year, however, the ADB expects the country to expand at a slower pace of 5 percent.)
\nThe ADB also revised downward to 6.7 percent the 7.3-percent growth outlook for Asia for 2013. The region expanded 7.2 percent in 2011.
\nChina\u2019s gross domestic product (GDP) was seen expanding 7.7 percent this year\u2014slow by the country\u2019s recent standards\u2014before bouncing back to 8.1 percent in 2013, still well-below the 9.3 percent achieved last year.
\nThe Manila-based lender said India would see GDP growth slow to 5.6 percent in 2012 before picking up to 6.7 percent next year.
\nAnalysts are wondering when will China crack the whip and provide the policy stimulus its economy needs to avoid a hard landing. HSBC economists Qu and Neumann said they had expected Beijing to act sooner.
\n\u201cChina has held back in providing a determined stimulus, with obvious implications for economic growth regionally,\u201d the economists wrote.
\nChina\u2019s power shift
\nDomestic politics may be one reason Beijing seems unwilling or unable to use its fiscal reserves to boost growth, with the Communist Party leadership on the verge of a once-a-decade power shift that has been clouded by controversy.
\n\u201cGiven that growth is highly investment-driven, supported especially by the public sector, any leadership change is bound to have a large impact on activity,\u201d Qu and Neumann said.
\n\u201cThis year, more so than during other transitions, political uncertainty may have had an especially restraining effect on investment decisions,\u201d they said.
\nAsia\u2019s worsening outlook is likely to be underlined when the IMF provides an update on the global economy in a twice-yearly report on Tuesday, in the run-up to weekend meetings of finance ministers from around the world in Tokyo.
\nBut is it time to hit the panic buttons? Has Asia really lost its economic vim? Some analysts say no.
\n\u201cAsia hasn\u2019t quite lost its mojo yet, but patience is needed before growth accelerates to more accustomed speed,\u201d Qu and Neumann said, predicting China would loosen policy early next year when the new leadership is in place.
\nNo need for panic
\nRhee agreed that there was no need for panic. \u201cThis is a natural adjustment to a more sustainable growth pace,\u201d he said of the outlook for developing Asia.
\nOf all the regions in the world that are struggling to cope with the fallout from Europe and the United States, Asia has the most ammunition in its policy armory to respond, research consultancy Capital Economics said on Friday.
\n\u201cAsia has significant scope to loosen both monetary and fiscal policy,\u201d it said. \u201cUnlike in most of the developed world, interest rates are well above zero across Asia, meaning there is room for interest rates to be cut in most countries.\u201d <\/p>\n
Asean resilient
\nANZ bank said in an analysis last week that while growth in China and India was on the slide, the core economies of Southeast Asia were proving remarkably resilient.
\nIt noted that while the rest of Asia had \u201crelinked\u201d with the West\u2014with domestic demand tracking weak external demand for exports\u2014this was not the case in Southeast Asia\u2019s biggest developing economies.
\n\u201cThis has broken down entirely in Asean (Association of Southeast Asian Nations) over the past few quarters with domestic demand and foreign demand now largely uncorrelated,\u201d the ANZ report said.
\nThis meant that Asian economies such as Indonesia, Malaysia, Thailand and Vietnam would \u201clikely hold up well\u201d if the global economy slowed further.<\/p>\n