Barclays, StanChart say Asia will weather U.S. slowdown

SINGAPORE (Reuters) - Asian economies will weather a sharp U.S. slowdown in 2008 and avoid recession, supported by

domestic demand and backed up by healthy foreign reserves, economists from Barclays and Standard Chartered said on Tuesday.

Standard Chartered (STAN.L), which is forecasting a U.S. recession this year, said it was sticking with its 2008 growth forecasts for China and India that were made before U.S. recessions fears mounted in recent weeks.

"We do not anticipate recession in Asia," the bank's chief economist, Gerard Lyons, said at a briefing for clients in Singapore. "The U.S. is not as important as it used to be," he added in reference to the rise of India and China.

Barclays (BARC.L), which does not expect a U.S. recession, said emerging Asia ex-China will maintain last year's economic expansion of 7.3 percent.

Barclays expects growth in the U.S. will slow in the first quarter of this year before picking up, bringing full-year growth to 2.3 percent from last year's estimated 2.2 percent expansion.

Peter Redward, Barclays head of rates research for emerging Asia, said at a media briefing that a repeat of 2001 -- when Asia slid into recession -- was unlikely because of strong intra-regional trade and corporate balance sheets.

He also said inventory levels in Asia were relatively low, reflecting how companies in Asia have been anticipating weaker demand from the United States for some time.

"Labor markets are likely to remain tight, with the continued growth in employment in the services and construction sectors, which will in turn support income growth," Barclays added in a report.

Standard Chartered economist Tai Hui said that a U.S. recession will hurt open economies such as Hong Kong and Singapore.

But countries such as India, China and Indonesia will be less affected because much of their growth stemmed from private consumption and investments.

Hui added that fears of a recession in China after the Olympics later this year were misplaced, saying such a possibility was remote.

"The whole idea is based on China tightening after the Olympics to slow the economy down. This has already started. China is not going to slam the brakes post-Olympics," he said.

Standard Chartered, which forecasts U.S. growth in 2008 of just 0.5 percent, predicted economic expansion in China and India will slow to 9.5 percent and 8.1 percent, respectively, in 2008 from 11.5 percent and 8.3 percent in 2007.

Barclays said China's economic growth will slow in 2008 to 10.2 percent. It expects India's economy to grow by 9.4 percent in the fiscal year to the end of March 2008, unchanged from its estimate for fiscal year.

(Reporting by Kevin Lim and Koh Gui Qing; editing by Neil Fullick)