Goldman Sachs Group Inc, on Monday, cut Indias growth estimate to 7.8 per cent from 8 per cent, and foresees export growth to probably halve. The Reserve Bank of India may cut interest rates twice in 2008, once in April and again in the second half, it predicted.
It also lowered its growth forecasts for all 10 Asian economies that it covered in the report including reductions to China besides India. Goldman Sachs reduced its growth forecasts for Asia on concern an expected recession in the US would erode demand for the region’s exports. Asia excluding Japan will expand 8.3 per cent in 2008, down from an earlier estimate of 8.6 per cent, Hong Kong-based economist Michael Buchanan said in the report. The investment bank last week cut its forecasts for US and Japan.
Recession in Japan
Goldman, which last year had said Asian growth was decoupling from US, is now forecasting a recession in the world’s largest economy that may hit shipments to the region’s biggest export destination. “There could be a ‘tipping point’ at which the US slowdown has more significant impact on Asia than before,” Mr Buchanan wrote.
“The further deterioration in the US economy comes as Japan is also teetering on the edge of recession.” Morgan Stanley and Merrill Lynch & Co are also forecasting that the US will slip into recession this year for the first time since 2001 amid fallout from subprime mortgage crisis. Goldman is predicting a 50 per cent chance of a recession in Japan, world’s second-largest economy.
