With the US economy projected to slow down, from 2.6 per cent in 2005-06 to 1.9 per cent in 2006-07 according to HSBC, most are dreading the impact on Asian countries which have benefited by the US' strong growth all these years, and the resulting increase in their exports to that country. HSBC, however, has cut its Asia growth forecast by just 0.2 per cent "" the larger impact will be on the smaller countries in the region. HSBC found, surprisingly, that the correlation between US GDP growth and Asian growth and exports was quite low (0.1 for overall Asian GDP and 0.2 for overall Asian export growth in real terms). While HSBC has a rigorous macro model to crunch the numbers, the results make sense even intuitively when you look at the export-to-GDP ratio of most countries and multiply this with the US share in their export basket "" this lies between 10 and 20 per cent for most countries and has fallen significantly over the decade while exposure to other Asian countries has risen commensurately. The impact on capital flows is also not expected to be very high since, in the case of China, for instance, much of the inward FDI flows are from within Asia.
