China and India’s growth will slow, but they will not plunge into a recession, according to global economist David Hale.
Speaking in Australia to trade finance clients of the Commonwealth Bank, Hale said that the collapse in equity markets would be felt in East Asia, with growth exports from China to the United States and Europe expected to drop to 5 per cent next year. Growth in China is expected to slow to 8 per cent next year, from 12 per cent last year.
India is suffering from increased inflation, although there is potential that India will focus on construction and improving transport infrastructure as a way of boosting growth. A growth rate of 7 per cent is expected next year compared to a 9 per cent growth rate two years ago.
Hale said Australia was sound and stable, but faced the risk of dropping commodity prices.
“Australia has had record prices for iron ore and coal but there is likely to be a weakness next year in export demand. And if there is a decrease in exports, we will see it in corporate earnings and fiscal earnings.
For Australia, there will be moderation and a subdued environment, but not a hard landing. The previously experienced 3 to 4 per cent growth will go down to around 2 per cent.”
