The Asian Development Bank (ADB) released its updated economic outlook on Wednesday. The bank revised downward its growth expectations for the region this year, and added that further significant changes in the forecast will have to be made if the U.S. government defaults on its debt obligations later this month.
In a revision released on Wednesday, the ADB revised down its GDP growth forecast for Asia to 6 percent from the 6.6 percent it predicted in April. That is due to softer-than-expected economic activity in China and India and worries about the impact of the quantitative easing program in the United States.
What the revision does not include is what would occur if U.S. lawmakers do not raise the government's debt ceiling this month. That would prompt an unprecedented technical default by the United States on its financial obligations.
The ADB's chief economist, Chang Yong-rhee, tells VOA that would certainly mean slower growth, not only for the U.S. but for Asia as well. The resulting market turmoil, he forecasts, would bring the biggest economic storm to the region since the 2008 financial crisis.
"We can expect a large outflow from the region. And probably the foreign direct investment and funding issues will come again. So I would rather say that, maybe, not as strong as 2008 but the impact can be close to that," said Chang.
Chang, speaking from Hong Kong, pointed out that some Asian countries would weather the financial storm better than others.
"If you're talking about low-income Asian countries which have a very limited linkage with the U.S. economy and also their financial markets are relatively closed, I think the impact will be less. But if you're talking about Indonesia, Malaysia, Thailand, [South] Korea, Hong Kong and Singapore whose capital markets are more open and their growth has been fueled by the capital inflows recently, they will be significantly impacted," explained Chang.
Chang says if a new debt limit is not approved by the U.S. Congress, in the next few weeks the ADB will begin to run a new model to devise fresh growth projections for the Asian region.
For 2014, the bank now pegs regional growth at 6.2 percent, down from its projection of 6.7 percent forecast six months ago.
U.S. Treasury Secretary Joseph Lew warned Congress on Tuesday that he had already taken every extraordinary measure he could to keep under the current legal debt limit of $16.7 trillion dollars. The treasury, Lew said, would run out of borrowed money by October 17th and the funds could be exhausted even sooner if the partial government shutdown that began Tuesday is not ended quickly.