HONG KONG: An interest rate cut in Australia and lowered economic growth estimates by the Asian Development Bank on Tuesday highlighted the extent to which the economic woes of Europe and the United States are spilling into the Asia-Pacific region.
Economic growth in much of Asia remains robust, the Asian Development Bank said. But trade and financial activity have already started to be eroded by the turmoil in Europe, and they risk being undermined further if the European debt crisis evolves into a full-blown financial and economic crisis like the one spurred by the collapse of Lehman Brothers in September 2008.
"Things are changing very rapidly - not just weekly and daily, but hourly," Iwan J. Azis, head of the development bank's office of regional economic integration, said at a news conference in Hong Kong, as he presented the bank's latest update on emerging East Asian nations.
The bank lowered its 2012 growth forecast for the emerging East Asia region - which includes China and much of Southeast Asia, but not India and Japan - to 7.2 percent, from a previous estimate of 7.5 percent.
It also cautioned that growth could be as low as 5.4 percent if the West's troubles escalated and tipped the United States and Europe back into recession.
Hopes of at least a modest upturn in the United States have risen after some better-than-expected manufacturing and job data in recent weeks, although unemployment remains stubbornly high.
The outlook for Europe, however, is grim, as austerity budgets and tighter lending by beleaguered banks constrain growth. Analysts at Nomura, for instance, said they expected the eurozone to contract 1 percent next year.
Top European policymakers are to assemble in Brussels on Thursday and Friday to fashion a solution to the region's sovereign debt woes. Over the last weeks, the crisis has spilled beyond small peripheral eurozone nations and begun to undermine investors' confidence in larger economies like Italy and even France.
The rapid deterioration has prompted a succession of support measures from international financial institutions in recent weeks: The European Central Bank lowered interest rates last month and is widely expected to do so again on Thursday.
