SINGAPORE (June 10): The gods have been conspiring against the world economy, where nothing seems to be going right. Economic activity is losing vitality virtually everywhere — even the seemingly unstoppable US economy is slowing. Tensions between the US and China are escalating. And this has not stopped the US from ramping up trade aggression even against friendly nations such as Malaysia and Singapore or potential strategic allies such as India.
How bad will things get and what will the impact be on regional economies?
In short, our view is that economic conditions are likely to deteriorate further. Financial markets seem to think that monetary easing will prevent the slowdown from turning into a downward spiral. That could be true but only up to a point. There are some fundamental unknowns — how the US and China conduct their relations, how convinced businesses across the globe are that the downside risks can be contained, and whether the slower global economy might trigger financial imbalances in China and elsewhere. Until there is clarity on these factors, the downside risks will grow.
