NEW YORK – At the annual meeting of the American Economic Association in early January, former U.S. Federal Reserve Chairwoman Janet Yellen, former European Central Bank President Mario Draghi and eminent economists warned that Western economies risked “Japanification”: a future of sluggish growth, low inflation and perpetually low interest rates. Yet, surprising as it may seem, this malaise also threatens East Asia.
Hong Kong, Singapore, South Korea and Taiwan, once called the “Asian tigers,” now face slow growth and disinflationary pressures. Last year, Hong Kong’s economy contracted by 1.2 percent, while the other three grew only modestly — Singapore by 0.6 percent, and South Korea and Taiwan by about 2 percent each. Inflation in each of these three countries was about 0.6 percent. East Asia’s economies suffered from weaker external demand — a result of slow growth in major industrialized countries and China — as well as domestic structural and supply factors. Moreover, their growth potential is trending downward.