Asia’s strong economic credentials are set to be tested in the face of slowing European economies and concerns about the outlook for the U.S. economy.
In a gold trading house in Bangkok’s Chinatown crowds pack the store. Although the commodity is traditionally favored as a safe investment, recent prices have been volatile on global markets amid the uncertainties for the Eurozone.
People speculated on short-term movements in the precious metal.
On Asian markets, gold ended at $1,593 an ounce, off a four-month low of $1,579 earlier.
Jitti Tangsithpakdi, president of the gold traders association of Thailand, says if the European economy is weak along with the United States – despite further easing in American monetary policy – gold is set to fall further.
In its latest survey, the United Nations Economic and Social Commission for Asia Pacific (UNESCAP) warns that the most immediate concern for Asia is the uncertain outlook for the eurozone, which could hit Asian exports.
The report says a disorderly default of sovereign debt in Europe or a break up of the euro common currency could mean nearly $400 million in trade losses in Asia.
Aynul Hasan, a senior UNESCAP economist, says that faced with the uncertainties in Europe, the Asia Pacific economies need to shift from export-led growth to domestic consumption.
“A default – that’s going to have implication in the financial market and there’s implications for financial markets and there will be a credit crunch," said Aynul. "[But] I think this region is prepared because China has already started to re-balance. They’re moving from investment-led towards the consumption [-led growth]. India is also but India is not so much dependent on the outside world.”
UNESCAP Asia Pacific’s developing economies slightly lowering their growth to 6.5 percent from seven percent last year. China’s rate is forecast to ease to 8.6 percent in 2012, from more than nine percent in 2011. India’s growth will drop to 6.9 percent from 7.5 percent last year.
U.N. economists say factors affecting China and India’s economies include lingering inflation and the uncertain global situation for China’s important export sector.
Asia Pacific economies are also likely to face protectionist trade measures as developed economies aim to stem higher rates of unemployment. However, the U.N. says the Asia Pacific region will remain the anchor of global economic stability despite the economic uncertainties.