The Eurozone sovereign debt crisis and the Asian economies: Facing the challenge

Abstract

The Eurozone sovereign debt crisis has created enormous uncertainties and financial stress in the global economy. The essential focus of this article is the impact of the crisis on the Asian economy through the twin channels of multilateral trade and financial flows. It examines how the Asian economies successfully withstood the crisis in a resilient manner and also why they were able to sustain a healthy GDP growth—albeit suffering a small deceleration. It infers that relatively sound fundamentals in the Asian economies moderated the negative impact of the crisis. Although not vulnerable, they suffered some impact of the Eurozone financial turmoil. They could not be regarded as totally immune to the ongoing Eurozone crisis. The global slowdown in demand began affecting the Asian economies in the third quarter of 2012. They began feeling the lagged impact of the demand slump in the advance industrial economies. At this time point grim economic data began coming out of the Asian economies.