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Summary Fears of a new global meltdown are growing after the United States received a credit downgrade.
Asian economies still scarred by the 2008 world recession are likely to have a harder time grappling with a new round of turmoil than they did three years ago, regional analysts said.Fears of a new global meltdown are growing after the United States received a credit downgrade for the first time and markets tumbled on expectations that Italy and Spain could join other European countries in seeking a bailout.Back in 2008, rotten debt in the banks was the problem, Singapores DBS Bank said in reference to global financial rescue measures that helped bring economic growth back on track.Governments took the debt off the banks -- and spent a lot of money propping up economies -- and now they themselves are in trouble. Thats why the situation may be worse than before: theres no one left to turn to.Stimulus spending during the 2008 crisis by nine East Asian economies including China and Japan -- which depend heavily on US and European demand -- totalled about $1.3 trillion, according to an Asian Development Bank estimate.The US Federal Reserve pumped over a trillion dollars into the countrys economy after the 2008 crisis and added $600 billion more in 2010.Singapore, one of Asias wealthiest countries, dipped into its reserves for the first time in 2009 as the economy sank into its worst recession since independence. It rebounded strongly and grew by 14.5 percent in 2010.As Asian markets tumbled on Monday, Prime Minister Lee Hsien Loong trimmed Singapores growth forecast for 2011 from a band of 5-7 percent to 5-6 percent, saying the global outlook remains uncertain.Credit watchdog Standard and Poors (S&P), whose downgrade of Washingtons top-notch AAA rating spooked markets, on Monday said the fiscal capacities of Japan, India, Malaysia, Taiwan and New Zealand had shrunk relative to pre-2008 levels.Regional financial systems may face reduced liquidity and a heightening of refinancing risk in the near term as borrowing costs rise.Asia could also be affected to varying degrees as governments are again forced to use their balance sheets to support the financial sector, S&P said.
