THE high degree of uncertainty resulting from the trade war between the United States and China could cause a “larger than expected” damage to global and economic growth, according to economists from the Asian Development Bank (ADB).
The assessment was made by ADB Economic Research and Regional Cooperation Department Principal Economist Donghyun Park, Senior Economics Officer Cynthia Castillejos Petalcorin, and Eonomist Shu Tian in an Asian Development Blog.
The ADB team said, however, that the impact of the trade war on developing Asian countries is still limited. But if it escalates, the impact will be larger and will also hurt financial markets, the ADB economists said.
“At the moment, with a great deal of uncertainty surrounding the eventual evolution of the China-US trade dispute, the financial markets seem to be rationally taking a wait-and-see stance. Nevertheless, if the dispute escalates significantly, the damage to trade and growth is likely to be tangibly larger,” they said.
The authors noted that the impact of the US-China trade war on Asian stock markets have been “statistically significant.” The stock index of China dropped 0.37 percent, or 37 basis points, while Japan, South Korea, Malaysia and Singapore lost 32 to 46 basis points.
They added that the stock indexes of Hong Kong, China, Malaysia, Singapore, Vietnam and the Philippines also slipped by 34 to 118 basis points.
The Philippine Stock Exchange index has been one of, if not the worst, performing stock markets in Asia. Last week the PSEi
was down 17.3 percent, or 1,730 basis points.
The PSEi reached its highest level at 9,058.62 and its lowest at 6,986.88 this year.
“Financial markets typically react on the announcement days to incorporate the new information into asset prices. However, uncertain about implementation means that actual implementation may also produce a market reaction,” the authors said.
Earlier, the United Nations Conference on Trade and Development (Unctad) said the trade war between the United States and China could undermine the strong economic growth prospects of Southeast Asian countries like the Philippines.
In its Trade and Development Report, the Unctad said Asean countries are poised to register high economic growth on the back of strong demand, rising private consumption and infrastructure investments, especially in the Philippines and Indonesia.
After posting GDP growth rates of 5.7 and 5.5 percent in 2016 and 2017, the Unctad said developing countries in Asia are expected to sustain that rate in 2018, as well.
The trade war between China and the US will likely cause China’s economic growth to slow to 6.7 percent this year, while India’s growth is expected to average 7 percent in 2018.
