Government debt in emerging Asian economies hit 50% of gross domestic product in the third quarter of last year, according to estimates by the Institute of International Finance, in a trend that suggests a regional shift away from fiscal conservatism. “Entering a financial crisis with a weak fiscal position worsens the depth and duration of the ensuing recession, particularly in emerging-market economies, because fiscal policy tends to be procyclical in these cases,” said Vitor Gaspar, director of the International Monetary Fund’s Fiscal Affairs Department. While government debt in emerging Asia is creeping up, it remains low compared with Japan’s 223.1% of GDP and 100.8% in the U.S. “The relatively low public debt gives the region more buffer against a potential global downturn, enabling policymakers to use expansionary fiscal policy to support demand,” said Frederic Neumann, co-head of Asian economic research at HSBC.
SINGAPORE — Two of the world’s most open and successful economies face tough times as the global downturn marks the end of one era and opens a new period of peril and possibility for both. Singapore and Ireland have staked their fortunes on being small, export-oriented, investor-friendly dynamos. Singapore was one of the original Asian Tiger economies, and the label passed to the Atlantic nation in the 1990s, as 15 years of 5 percent average growth earned Ireland its “Celtic Tiger” reputation. But as Kishore Mahbubani, a former Singapore diplomat and author of The New Asian Hemisphere – The Irresistible Shift of Power to the East, told The Washington Times, “being globalized has its downside – when the world economy stutters, the more open economies feel the pain first.” Both Singapore and Ireland are officially in recession, defined as two consecutive quarters of negative growth. Last week, U.S. computer giant Dell Inc. culled 2,000 jobs at its plant in Limerick in the west of Ireland, while Singapore’s Trade Ministry stated Jan. 2 that it expected the economy to contract 2 percent in 2009, the worst predicted performance of any Asian economy for the coming year.