Speaking to CNBC-TV18, Arnab Das of Dresdner Kleinwort Wasserstein said that he sees more downside in economic performance in EMs. 2008 will be a difficult year for EMs, he addedExcerpts from CNBC-TV18’s exclusive interview with Arnab Das:
Q: What do you make of what's going on globally and what would you expect emerging markets to do now in the light of what's going on in the US?
A: What's going on is a gradual kind of spread of this problem that started from the housing problem in the United States - a subprime meltdown through all of this structured credit issues into bank capital being destroyed in large global banks affecting credit markets and then gradually moving into the equity markets.
A lot of people until now have been using a couple of buzzwords for emerging markets and emerging markets in Asia, in particular. They have been talking about the decoupling and about safe havens. We have always thought that essentially an unsustainable proposition like where in a world of globalization, increasing integration and inter-effectiveness.
In the end there is no place to hide from what is shaping up - it is a very difficult year economically and financially in US and in high-income countries. The chances of a recession in the US is nearly even - our estimation at the firm is that there will be 45% chance of recession. Other firms are calling for an actually technical recession in a very difficult year in the US and that’s going to have a global effect. The dollar is going to help US exports - it's way out of its problem to some degree but the weakness of the dollar and its domestic demand in the US is going to be a problem for the rest of the world which now has been relying heavily on a few motors of growth and if US domestic demands and strong growth in China, growth in India and in the emerging markets - much of the growth in the emerging markets has associated and has benefited from the growth in US and from exceedingly favorable financial conditions and all of those things are starting to unwind altogether starting in the second half of 2007.
So I think there is more downside in economic performance and there is more financial problems and credit problems would continue and it’s going to be difficult year for equities and there is going to be an affect on the growth rate in Asia as a result. I don't think there is going to be a recession in the emerging markets as a whole or in emerging Asia. But a slowdown in the US or a recession in the US will certainly slowdown the rate of growth of exports from Asia to the US and from other emerging market countries to the US.
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