In the November issue of his Newsletter “Scenarios” SACE deals with two topics:
· Asia: monetary policies against the global crisis;
· EU sanctions on Iran: effects for Europe?
We have already dealt extensively with this second theme in the article "Sanctions on Iran: what effects on the country's economy" and above all in the attached analysis by Jasmine Zahalka. We therefore focus on the first.
In response to the economic crisis of 2009, the policy makers of the main Asian countries have implemented a series of stimuli, fiscal and monetary, to react promptly and embark on the road to economic recovery. Clearly such measures have as a side effect the overheating of the economy, visible in the high rates of inflation and in bank credit growth.
However the target of governments and central banks of emerging Asian countries is clearly aimed at stability of the inflation rate to preserve the best conditions to compete internationally. Precisely for this reason, at the first signs of a concrete recovery, most countries reversed course by adopting restrictive monetary policies. The effects of the measures are naturally linked to the specific characteristics of the various countries, above all with reference to the dependence on international demand, the degree of openness of the economy and the degree of diversification of the export sectors.
Starting since mid-2011, the changed international context and in particular the slowdown in the growth of advanced economies and the downward correction of GDP estimates have forced most of the Asian countries to carry out a course correction first of all with reference to monetary policy. The interconnection between advanced economies and the countries of emerging Asia is clear by looking at the numbers. In fact, a reduction in the GDP growth rate of the former (from 1,9% to 1,3%) corresponds to a significant reduction also for the latter (from 9,6% to 7,5%).
In the SACE data sheet, reference is made to three real risks that the Asian economies could face: the export slowdown, investment reduction both domestic and foreign and the contagion via financial markets. Precisely for these reasons, most countries have adopted conservative or wait-and-see monetary policies, with the exception of those that are more closed from the commercial point of view (such as Indonesia or the Philippines) and therefore less exposed to shocks deriving from foreign demand which pursue a moderately expansive policy.
Il risk of a slowdown in Asian economies should not be underestimated because it could trigger one chain reaction that would aggravate the situation of advanced economies. In fact, the largest countries in the region, China and India, are among the world's main importers of raw materials and if there were a reduction in exports to these countries, this would translate into a consequent reduction in imports. This situation also concerns Italy, whose exports to China and India in 2010 reached the figure of 12 billion euros, up 25% on the previous year.
A possible way out to avert this risk can be given by an action by Asian countries aimed at strengthening domestic demand and relaunching intra-regional trade relations in order to reduce the region's exposure to external shocks. In this way it could be avoided, in a collateral way, to trigger a negative spiral that would involve the advanced economies.
