Economies such as Singapore and Hong Kong have benefited from the global economic boom in the last five years. But their open and exposed economies mean they are also vulnerable to recessionary pressures as the world economy slows down.
Skyscrapers in Singapore's financial districtHowever, Morgan Stanley said it is not all doom and gloom for Singapore. Experts said the country would be among the first to bounce back once a global recovery takes place.
Stephen Roach, chairman, Morgan Stanley Asia, said: "If the global economy surprises on the upside, Singapore will be one of the first economies in the region to benefit from that. But I think it is hard to be too optimistic right now on global economy prospects over the next few years."
Morgan Stanley, too, is feeling the pinch of the global slowdown. It announced on Thursday that it would be retrenching 10 per cent of its staff in the institutional securities unit and 9 per cent in asset management.
The global financial services firm said less of these cuts are likely to come from Asia. In fact, Morgan Stanley remains bullish on the prospects of Asian growth once the crisis is over and this bodes well for markets like Singapore.
Roach said: "The main challenges are to consider the options that (the) Singaporean government must consider to counter very powerful external headwinds around the world.
"The good news is that Singapore is more integrated with the rest of Asia than it is with Europe, South America and North America. The Asian region itself is likely to fair better than the rest of the world in this global downturn."
Morgan Stanley downgraded its growth forecast for Asian countries earlier this week, but it expects a sharp recovery in Asia in the next few years on the back of solid economic fundamentals in the region. - CNA/so
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