If Europe's debt troubles deepen or america slips into another recession, Asia's export-driven economies would end up being vulnerable through both trade and investment channels. Economists have begun marking down growth forecasts while stocks have fallen over the region.
Japanese, Chinese and South Korean financial regulators discussed the global threats inside a conference call on Tuesday, Japan's financial services minister informed a news conference.
"Asia will not be immune to some global slowdown, " said Tharman Shanmugaratnam, Singapore's finance minister. "We are already at stall speed in america and Europe, which means we are now more likely than to not see a recession. "
Singapore, one of the planet's biggest trade hubs, is heavily exposed to global trade cycles and it is economy contracted in the second quarter, compared with the last three months. Some economists predict another contraction in the actual July-to-September period, which would fit the commonly used economic downturn benchmark of back-to-back negative quarters.
Tharman's prognosis was gloomier than those on most US and European officials, who still see the worldwide economy escaping another recession.
World Bank President Robert Zoellick, speaking in Singapore in the same conference as Tharman, said another recession was unlikely even though risks were high.
But a surprisingly weak US August employment report as well as mounting worries about European sovereign debt sustainability have heightened concerns of the downturn.
US stock markets were expected to sell off once they reopened on Tuesday after a three-day holiday weekend. Western shares fell sharply on Monday.
With growth constrained in many advanced economies, investors are looking to emerging markets to get the slack. But growth is already slowing in countries for example China, and with inflation stubbornly high, policymakers are not inclined to supply much of an artificial boost.
Huang Guobo, the main economist at China's currency regulator, said growth may relieve to below 9% in 2012, but fighting inflation remained the very best policy priority.
"The weakening global demand for Chinese exports would have been a challenge, " Huang said. "Next year, if the scenario continues, China's growth rate may fall below 9%. inch
Many private economists have already cut their 2012 development forecasts for China, so a sub-9% reading next year wouldn't come as a big surprise.
However, it would mark a substantial slowdown. China, the world's second biggest economy, managed to sustain growth in excess of 9% even during the depths of the global economic crisis in 2008 and 2009.
China expects growth to average 7% within the next five years, so slipping below 9% in 2012 wouldn't be a policy disaster. In fact, it might assistance to contain inflation, which hit a three-year high of 6. 5% within July.
Data due on Friday is expected to show it moderated a little in August, although it is almost certain to stay far above China's annual target of 4%.
Asia's advanced economies were also cautious about global repercussions. Australia's central bank held interest rates the same on Tuesday, as expected, but said the outlook for that global economy was less clear than it was earlier within the year.
Central banks in Japan, South Korea, Indonesia, Malaysia and also the Philippines hold policy-setting meetings later this week, and the dimming global picture will probably persuade them all to hold interest rates steady.