HONG KONG -- If the European debt crisis infects the global economy, emerging East Asia's growth could shrink by a quarter next year as exports plunge, according to a report to be released today by the Asian Development Bank.
The ADB predicts that gross domestic product for emerging East Asia — which includes the Association of Southeast Asian Nations, Hong Kong, South Korea, Taiwan and mainland China — will grow 7.2% next year, down from 7.5% in 2011. A global economic crisis could knock 1.8 percentage points off that number.
That is a "conservative" estimate, according to Iwan Azis, head of the ADB's Office of Regional Economic Integration, because it doesn't factor in the effects of a collapse in consumer and business confidence, tightening credit or capital outflows.
ADB's report provides a glimpse into how emerging economies could be affected if Europe's troubles spark a worldwide contagion similar to what happened after the collapse of Lehman Bros. in 2008.
Slowing growth in emerging economies could reduce demand for American goods, which in turn could constrain growth in the U.S.
A global economic crisis would have a "serious yet manageable impact" in Asia, according to the report.
Other emerging economies — such as those in Latin America— could fare worse because "Asia is in a much better fiscal position in terms of responding to this crisis," says Azis.
As Asia's dependence on exports has increased, the region has suffered more severe economic shocks due to slumps in Europe or the U.S. During the 2007-2009 U.S. recession, East Asia's GDP fell 2.9 percentage points, compared with only 1.2 percentage points during the 1991 downturn.
After the last global recession, Asian governments rolled out stimulus packages to stoke domestic demand and ramped up trade outside Europe and the U.S., as well as within Asia. China, for instance, expanded exports to Latin America and Africa.
These steps should make East Asia "less vulnerable" to drops in external demand, according to the ADB.
But if a global recession hits, the export-oriented economies of Singapore, Malaysia and Hong Kong are still likely to be hard hit. In 2010, Hong Kong's exports totaled 174% of its nominal GDP, Singapore's nearly 160% and Malaysia's 84%, according to data from ADB and the International Monetary Fund.
Tightening credit has already become a serious concern in Asia: As European banks pull back lending, businesses in Asia are finding it harder to fund their exports and to expand through acquisitions or organic growth, says Rajiv Biswas, chief Asia economist at IHS Global Insight.
If a full-blown credit crunch develops, it could pose a "very serious negative" for the region, according to Biswas.
In a global economic crisis, "not even Asian financial economies will be spared," says Azis.