The massive slowdown in demand for Asia's exports will force the region to "get religion" and finally boost its consumer spending, the chairman of Morgan Stanley Asia Stephen Roach said Thursday.
Roach, who was one of the few economists to predict the US-led economic crisis, said the region's failure to develop its own markets meant the unprecedented slowdown would hit Asia hard.
"Now, with a monster external demand shock — the US, Japan, Europe, all in recession simultaneously, something we have never seen post World War Two — Asia, which is much more externally dependent today than it was 10 years ago, is in trouble," he told a meeting of the Asia Society.
"There is not a country in the region that is not slowing sharply or in outright recession."
Roach said that although Asian economies had made improvements since the financial crisis of 1997, governments still needed to boost spending among the region's notoriously aggressive savers.
"I think (an) important outcome of this global crisis is you will see Asia finally 'get religion' of internal private consumption — the piece that was missing from the response to the financial crisis of 1997/98," Roach said.
He warned that China, which relies heavily on its export sector, had been hit particularly hard by the slowdown. Roach said China's growth in the second half of the year "basically went to zero".
"For an economy that needs six percent growth to prevent unemployment from rising and to limit the outbreak of social instability, a major shortfall we saw in China in the second half of last year is very, very worrisome," he said.
He said Beijing needed a strong fiscal stimulus package, but also had to focus on boosting consumer spending.
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