Asia markets fell sharply Friday, reacting to Wall Street's plunge over Greek debt crisis worries. But analysts and the UN regional economic arm remain upbeat on Asia's economic prospects despite the financial jitters.
Stock markets across Asia fell, including those in China, Indonesia, Taiwan, Thailand and New Zealand, by up to four per cent. Gold climbed to just over $1200.00 an ounce - a gain of $20.00 from the previous day.
The wave of selling of stock came as investors feared that Greece's debt problems could spread to other countries within the eurozone such as Spain and Portugal.
Asia's economies have largely shown sound recovery from the global financial crisis of 2009, due largely to government stimulus packages that led to increased domestic spending.
But the market uncertainties could still rattle economic confidence.
Noeleen Heyzer, executive secretary of the U.N.'s regional economic and social arm (UNESCAP), said economic recovery remains fragile and problems faced in the eurozone could lead to more uncertainty.
"This rebound is actually fragile and it is uneven," said Heyzer. "It is a 'v' shape rebound that can become a double dip. We're very concerned about several of the risk factors that would have to be managed and this included inflation, the building up of asset bubbles because of excess liquidity, appreciation of the exchange rates in many of the Asian countries."
In Japan the Nikkei average fell over four per cent to a two month low as shares fell as a result of concerns over Europe's debt crisis.
Japan's Prime Minister Yukio Hotayama in public comments expressed his concerns over what he called "the Greek problem".
The Bank of Japan Friday said it was willing to offer $22 billion in short term loans to commercial banks to boost liquidity in the world's second largest
In China markets dropped almost two per cent over concerns the central government's moves to curb bank lending with the European Union - China's largest trading partner.
While the uncertainty swept across the markets, analysts said they were still confident in the Asian economies.
Heyzer said the problems faced in the eurozone highlighted Asia's need to focus its economic development by boosting intra-regional trade and investment.
"Just look at what is happening to the eurozone today; what is happening to the U.S. debt levels today and the global imbalances. So what Asia will have to do is to look to new drivers of growth that takes into account … globalization, side by side with regionalization," said Heyzer.
UNESCAP in its latest regional survey says strong support from expansion policies has helped Asian and Pacific economies to reverse the declines of the latter half of 2009. But the outlook remained dependent on the world economy stabilizing.
Analysts Friday say they expect Asia's markets to recover as most companies in the region are not directly exposed to Europe's hardest hit economies.