East Asia to continue relying on rich nations - Deutsche Bank

MANILA, Philippines - East Asian economies will remain reliant on developed nations in 2011, a leading global financial institution said.

According to Deutsche Bank chief economist for India, Indonesia and the Philippines Taimur Baig, East Asia would remain tied to demand in Europe, Japan and the United States in 2011.

He said as the major developed nations will not register dramatic gains in 2011, the same will occur in East Asia.

Deutsche Bank forecasts the Japanese economy to remain flat, the eurozone to inch up a mere one percent, and the US economy to grow three percent next year.

Asia (excluding China and India) will likely grow seven percent this year but this will slow down to 4.6 percent in 2011.

“Despite the US forecast being essentially the same as the expected outcome for 2010, Asian economies will find external demand weaker because of the other two parts (euro zone and Japan) of the G3,” Baig said in a report that appeared in FinanceAsia.

He added that close linkages between regional exports and external consumption remained. Even investment follows the export cycle closely, and this connection has not waned in recent years .

Singapore, Hong Kong and Taiwan are especially export-dependent, so their growth is largely reliant on G3 consumption. Malaysia, Thailand and Korea follow, with substantial but smaller correlations to industrial country demand.

Indonesia is an exception, with domestic consumption a significant component of its GDP, but its fortunes are also “tied to the commodity price cycle to some extent.”