Asia will not escape unscathed if the U.S. falls into recession, but some countries in Southeast Asia may be more badly hit than others, economists told CNBC.
"I suspect [it] will be Singapore first," he said when asked which economies in Southeast Asia will be hit first if the U.S. falls into a recession. The island-state will likely be the first because of its export dependency and its small and open economy, Chua said."At first glance, I would suspect the more open and trade-dependent Asian economies like [Singapore], Taiwan and South Korea and maybe Thailand would be the usual suspects," she said.
Singapore's"correlation and dependence on external demand is very high," Chua said. If the U.S. were to slip into a recession, that"dependence and causality" will hit the more export-oriented economies, he added. Singapore is extremely connected with the rest of the world and a"shock wave" in any country will definitely have a ripple effect across the city, Irvin Seah, senior economist from DBS Group Research told CNBC.The Maybank report said that if the U.S. heads into recession, the downturn is"likely to be shallow rather than deep."
However, Chua said the U.S. could possibly face a"prolonged" recession and whether Singapore is also headed for a long-drawn recession or not will depend on China's Covid reopening since China is the city-state's largest trading partner.Singapore is a big exporter of electrical machinery and equipment, but output in its electronics cluster fell 6.4% in July compared with last year, data from theOutput in the semiconductor sector dropped 4.
"China is the biggest export market for many ASEAN countries … But exports to China have been terrible," Chua said referring the the 10-member Association of Southeast Asian Nations."Because Singapore is so heavily dependent on exports, [it] will feel it."China's zero-Covid policy has also hindered Singapore's tourism recovery since the pandemic, economists said.
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