>RISKS OF AN ASIAN RELAPSE (MORGAN STANLEY)

■ The spin game is on as the world tries to talk itself out of the worst recession since the end of
World War II. The good news is that there is a slowing in the rate of deterioration in the global economy. The tougher news is that this is hardly surprising. In the aftermath of unprecedented annualized plunges in real global GDP on the order of 6–7% in the fourth quarter of 2008 and the first quarter of 2009, the pace of deterioration almost had to moderate.

■ Export-led Asia lacks support from internal private consumption and remains more dependent on external demand than ever before.

■ Unless Asia finds a new source of demand to replace the overextended American consumer, it will face surprisingly stiff headwinds for years to come.

■ China is vulnerable to a relapse in 2009, as a fading investment stimulus is not countered by a US-led snapback in external demand.

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