Everybody is of the opinion that it looks more like a recession in the US. This can be reiterated by some of the statistics and a few economic indicators which were released in January. The leading indicators point out an increase in unemployment, a decrease of 5% in retail sales and a dip of 0.4% in industrial production.
The housing market, where all the trouble started, is still in doldrums. Some of the banks are reporting big new losses and layoffs. The stock market is bearish. Presidential election campaigns are starting to focus on the economy as a trump card. So the world's largest economy is indeed passing through a recessionary phase. What are its implications for the world economy?
Stephen S Roach, Chairman of Morgan Stanley Asia and one of the most influential Wall Street Economists, has warned that Asia and India will be hit hard due to a likely recession in the US in 2008, saying, "if the US sneezes, Asia will catch a cold."
In his view, the equities market of emerging economies like India will be subject to high rates of volatility as decoupling theories in the present context of attempts at global market integration will not work. But when dependence on exports is taken into consideration India will take a far milder beating as it is less export dominated in comparison to other Asian economies. In the case of China, its exports to the US alone are as high as 21%, while for Japan the figure is 22.5%. Stephen, therefore, conclude that Eastern Asia and China will be the worst hit by the recession in the US. |
