When US sneezes, Japan, Europe sneeze hard, too
For those who believe Europe and Japan can escape most effects of the US economic downturn, the OECD published contagion estimates on Wednesday which suggest that when the United States sneezes, they do too, and hard.
By TNN |
PARIS: For those who believe Europe and Japan can escape most effects of the US economic downturn, the OECD published contagion estimates on Wednesday which suggest that when the United States sneezes, they do too, and hard. ���Decoupling was always a bit of a myth,��� Jorgen Elmeskov, chief economist at the Organisation for Economic Co-operation and Development, said in an interview.
The estimates, a first attempt by the OECD to quantify how contagion works in an increasingly interconnected world economy, were published in OECD���s twice-yearly Economic Outlook. The calculations showed the US economy losing 3/4 of a percentage point of growth this year and 1-1/4 percentage points next year because of deterioration in financial markets, such as more expensive credit.
The spillover makes just as big a hole in euro zone economic growth by the end of next year, according to the OECD. It also estimated that the cost to Japanese growth would be a half percentage point this year and 1-1/4 percentage points in 2009.
Half of the knock-on impact in the euro zone and Japan is the direct effect of recent additional turmoil on housing and financial markets. The rest is due to related upward shifts in the value of the euro and yen, said the OECD. China, the other economy covered by the ready reckoner, fared better. The OECD reckons the spillover will cost it a quarter percentage point of growth this year and half a percentage point next year.
���China is negatively affected due to the assumed faster appreciation against the dollar and lower OECD demand for its goods,��� the report said. ���The analysis points to relatively limited scope for other OECD nations to decouple from the US-centred financial shock.��� China is not a member of the OECD, which has 30 members.
The estimates, a first attempt by the OECD to quantify how contagion works in an increasingly interconnected world economy, were published in OECD���s twice-yearly Economic Outlook. The calculations showed the US economy losing 3/4 of a percentage point of growth this year and 1-1/4 percentage points next year because of deterioration in financial markets, such as more expensive credit.
The spillover makes just as big a hole in euro zone economic growth by the end of next year, according to the OECD. It also estimated that the cost to Japanese growth would be a half percentage point this year and 1-1/4 percentage points in 2009.
Half of the knock-on impact in the euro zone and Japan is the direct effect of recent additional turmoil on housing and financial markets. The rest is due to related upward shifts in the value of the euro and yen, said the OECD. China, the other economy covered by the ready reckoner, fared better. The OECD reckons the spillover will cost it a quarter percentage point of growth this year and half a percentage point next year.
���China is negatively affected due to the assumed faster appreciation against the dollar and lower OECD demand for its goods,��� the report said. ���The analysis points to relatively limited scope for other OECD nations to decouple from the US-centred financial shock.��� China is not a member of the OECD, which has 30 members.
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