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Goldman Sachs says Asia is ‘best positioned’ for economic recovery

SINGAPORE — Asia is well placed for economic recovery compared to the rest of the world because it has mostly succeeded in containing the coronavirus, Goldman Sachs said this week.

“We think Asia’s really the best positioned of the major regions right now, just given the good control of the virus in most of the region outside of India and some parts of Southeast Asia,” said Andrew Tilton, chief Asia economist at the investment bank.

He said China’s consumer spending has been “more sluggish” because, unlike in the U.S., stimulus measures were not directed at income replacement. “But I think given the good control of domestic transmission of the virus in China, we are seeing services activity come back there as well,” he told CNBC’s “Street Signs Asia” on Monday.

People wearing face masks walk along Qianmen street to shop during the country’s national “Golden Week” holiday in Beijing on October 5, 2020.

Noel Celis | AFP | Getty Images

The global lockdown triggered by coronavirus outbreak hit world economies really hard, but there is now “reasonable momentum” globally, Tilton said.

Recent purchasing managers’ indices were mostly better compared to a month ago, suggesting that momentum in the industrial sector remains good, he said. “We’re still reasonably upbeat on the recovery going into 2021.”

U.S. election, stimulus effect

Tilton added that if Democratic presidential nominee Joe Biden were to win the election, it would affect Washington’s tariff and trade policies. “We do think the result is very important for Asia and for global activity broadly.”

Fiscal stimulus in the U.S. would have positive spillover effects in terms of growth to Asia.

Andrew Tilton

Goldman Sachs

He also said new stimulus measures from Washington would be good for Asia.

“Fiscal stimulus in the U.S. would have positive spillover effects in terms of growth to Asia,” he said.

“In an event where you got more fiscal stimulus – that would probably be better for the more export oriented economies,” Tilton said. “(It is) probably less good for those economies that have traditionally run current account deficits and more reliant on foreign borrowing because in that scenario, you probably see U.S. and global interest rates go somewhat higher.”

However, that’s not likely to happen before the presidential elections in November, as U.S. lawmakers have been unable to reach an agreement on how much aid to provide.

“In the event that we have a so-called blue wave — that is to say Biden winning and unified Democratic control — we think the prospects in that scenario for a very large fiscal stimulus are probably bigger,” Tilton said.

The Democratic-held House approved a $2.2 trillion stimulus proposal last week, but the bill is unlikely to be passed by the Republican-controlled Senate. Treasury Secretary Steven Mnuchin offered a $1.6 trillion plan in response.

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