Asia can withstand shocks from financial turmoil in Europe, but export-dependent economies like Singapore, Hong Kong, Malaysia and the Philippines are vulnerable, Singapore’s DBS Group said Thursday.
China, India and Indonesia – countries with large domestic markets – are the least vulnerable from the effect of falling exports to the continent, said DBS, Southeast Asia’s biggest bank.
From a debt perspective, South Korea, Indonesia and the Philippines could be the most exposed because of the large size of their foreign borrowings as a percentage of gross domestic product (GDP), it said in a market commentary.
But while another recession in Europe would hurt Asia, the impact would be less severe because of the region’s reduced dependence on the United States, Japan and Europe as markets for the region’s exports, DBS said. In addition, most Asian economies are now net creditors, having paid off their debts and increased their savings since the Asian financial crisis over a decade ago.
‘At the end of the day, the smaller, highly export-dependent economies of Singapore, Hong Kong, the Philippines, Malaysia and Thailand would surely remain the most vulnerable to an export slowdown (to Europe),’ DBS said.
And while some degree of contagion is still possible, ‘it is truly a question of degree and Asia is much better placed to weather a storm than it was ten years ago,’ it said, adding that Asia’s debt and should help it weather any contagion from Europe ‘with relative ease.’