Recession risk climbs for some Asian economies, survey shows

THE risk of recession in a handful of Asian economies is rising as higher prices spur central banks to accelerate the pace of their interest rate hikes, according to the latest Bloomberg survey of economists.

Sri Lanka, which is in the midst of its worst economic crisis ever, has an 85 per cent probability of falling into recession in the next year, up from a 33 per cent chance in the previous survey - by far the highest increase in the region. Economists also raised their expectations for a chance of recession in New Zealand, Taiwan, Australia and the Philippines to 33 per cent, 20 per cent, 20 per cent and 8 per cent, respectively. Central banks in those places have been raising interest rates to tame inflation.

The probability of recession for several other Asian economies remained unchanged in the survey. Economists see a 20 per cent chance that China will enter recession and a 25 per cent likelihood that South Korea or Japan will enter one.

Asian economies have largely remained resilient compared to Europe and the United States.

Surging energy prices have hit countries such as Germany and France the most, with a spillover effect impacting the rest of that region, said Steven Cochrane, chief Asia-Pacific economist at Moody's Analytics.

In general, Asia's risk of recession is around 20-25 per cent, he said, adding that the odds of the US entering one is around 40 per cent, while Europe stands at 50-55 per cent.

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Bloomberg Economics' model puts the chance of a US recession at 38 per cent within the next 12 months, up from around 0 per cent just a few months before. That model incorporates a variety of factors ranging from housing permits and consumer survey data to the gap between 10-year and 3-month Treasury yields. BLOOMBERG