By IANS
New York : Projecting a robust 9.4 percent growth for the Indian economy in 2007, Merrill Lynch Tuesday said along with China the two countries had ensured that the US today cannot change the global outlook significantly.
“The impact of our lower US growth forecast is smaller than many investors realise. The 80 basis point cut in our US growth forecast brings 2008 global growth to 4.8 percent from 5 percent previously,” the consultancy’s ‘Global Economies’ report said.
“This highlights the changes that have occurred to the global economy over the past five years – 75 percent of global growth comes from emerging markets, with China and India contributing the lion’s share,” the report said.
“Barring a major recession, the US economy alone cannot significantly change the global growth outlook. This is a critical fact for an open, export-dependent region like Asia,” said the New York-based institution.
The report’s economic growth forecast for 2007 is 10.9 percent for China, 1.8 percent for the US, 4.6 percent for South Korea, 7.9 percent for Singapore, 3.7 percent for Thailand, 2.7 percent for Germany and 2.8 percent for Britain.
The report said domestic demand has been strong in India for several years and that, unlike the US, the consumer in India was not credit driven to reflect that it is a high-savings economy with rising foreign exchange reserves.
“Several economies are boosting export in non-traditional areas such as services and labour. India’s service sector has captured the most press,” it stated.
“Exports of software and business services, such as call centres, accounted for nine percent of gross domestic product growth over past three years – a striking figure for such a large and domestically-oriented economy.”
Merrill Lynch said its view on Asian fundamentals was admittedly bullish even as it expected a lasting slowdown in the US economy, led by the housing sector and consumer behaviours.
“But the spill-over to the real economy in Asia is much less. And the positive cyclical and structural forces we see in Asia and the rest of the world provide some offset,” the report said.
“Although there may be downside risks to regional growth in 2008, we expect it to remain above 7-7.25 percent. As a comparison, Asia grew only 5.1 percent in the downturn of 2001.”
Terming it as its “strongest views”, the report said the growth risks in Asia were limited since its economies were less vulnerable to a financial sector shock, adding the focus would remain on infrastructure and urbanization.