The burning question: has Asia truly lost its mojo?
Fallout from US and European woes and slowing in China and India cloud prospects in the region
First the International Monetary Fund warned developing Asia to brace for shocks from the West. Then the Asian Development Bank (ADB) slashed its regional growth forecasts. Now analysts are concerned that Asia may have lost its mojo?
The European debt crisis and weakness in the United States have long been drags on Asian growth, but throw in China's difficult leadership transition and the outlook is grim.
"It wasn't supposed to turn out like this. Growth in recent months has faltered again, confounding expectations of a gradual recovery," HSBC economists Qu Hongbin and Frederic Neumann wrote in a report. "China is one culprit, though a wobbly West is equally to blame."
As Asia's powerhouses, China and India, slow faster than many had expected, the ADB last Wednesday revised down its growth estimates for the region's emerging economies to the lowest level since 2009.
Echoing assessments from the IMF, HSBC also warned of significant risks arising from the euro zone and the uncertain recovery in the US, both of which are key export markets for Asia's factories.
"Developing Asia is slowing down much more than we expected," ADB chief economist Rhee Changyong said.
"The years of two-digit growth in Asia are coming to an end."
The ADB cut its growth forecast for this year for developing Asia, which comprises 45 nations, from 6.9 per cent in April to 6.1 per cent, which is the lowest since 2009 when the region expanded 6 per cent.
It also revised downwards the 7.3 per cent growth outlook for next year to 6.7 per cent. The region expanded 7.2 per cent last year.
China's gross domestic product was seen expanding 7.7 per cent this year, which is slow by the country's recent standards, before bouncing back to 8.1 per cent next year, but still well below the 9.3 per cent achieved last year.
The Manila-based lender said India would see GDP growth slow to 5.6 per cent this year before picking up to 6.7 per cent next year.
Analysts are wondering when China will crack the whip and provide the policy stimulus its economy needs to avoid a hard landing. Qu and Neumann said they had expected Beijing to act sooner.
"China has held back in providing a determined stimulus, with obvious implications for economic growth regionally," they wrote.
Domestic politics may be one reason Beijing seems unwilling or unable to use its reserves to boost growth, with the Communist Party leadership on the verge of a power shift that has been clouded by controversy.
"Given that growth is highly investment-driven, supported especially by the public sector, any leadership change is bound to have a large impact on activity," Qu and Neumann said.
"This year, more so than during other transitions, political uncertainty may have had an especially restraining effect on investment decisions."
Asia's worsening outlook is likely to be underlined tomorrow when the IMF provides an update on the global economy in a twice-yearly report, in the run-up to weekend meetings of finance ministers from around the world in Tokyo. But is it time to hit the panic buttons? Has Asia really lost its economic vim? Some analysts say no.
"Asia hasn't quite lost its mojo yet, but patience is needed before growth accelerates to more accustomed speed," Qu and Neumann said, adding Beijing would loosen policy early next year with new leadership in place.
Of all the regions in the world that are struggling to cope with the fallout from Europe and the US, Asia has the most ammunition in its policy armoury to respond, research consultancy Capital Economics said.
"Asia has significant scope to loosen both monetary and fiscal policy," it said. "Unlike in most of the developed world, interest rates are well above zero across Asia, meaning there is room for interest rates to be cut."
ANZ Bank said last week that while growth in China and India was on the slide, the core economies of Southeast Asia were proving remarkably resilient.
It noted that while the rest of Asia had "relinked" with the West, with domestic demand tracking weak external demand for exports, this was not the case in Southeast Asia's biggest developing economies.
This meant that Asian economies such as Indonesia, Malaysia, Thailand and Vietnam were likely to "hold up well" if the global economy slowed further.
Tom Holland is on holiday