Outlook for Asian tigers unsteady

Singapore's economy has shrunk for the first time since 2003

The latest economic data from South Korea and Singapore suggests that the slowdown in US economic growth could be starting to hit East Asia.

South Korea's exports increased by a worse-than-expected 15.5% to $33.25bn (£16.8bn) in December, as it saw its first monthly trade deficit since 2003.

Separately, Singapore's economy shrank in the past three months for the first time in five years.

Both countries are heavily reliant upon US demand for their goods.

A slump in Singapore's semiconductor exports contributed to the country's economy contracting by an annualised 3.2% in the October-to-December period, down from an expansion of 4.4% in its previous quarter.

Emerging market support?

With higher interest rates causing chaos in the US housing market and continued strains in global credit markets, pressures on the finances of the American household are expected to get worse.

Analysts say this is likely to mean a cutback in discretionary spending on goods produced in Asia, mainly electronics and cars.

Yet many remain reasonably upbeat that solid economic growth in India, China and the Middle East will help support East Asian trade from a US slowdown in 2008.

"A slower US economy should hurt in the first half, although solid exports to the emerging markets such as China are expected to keep the growth rate at two digits," said Park Sang-Hyun, chief economist at CJ Investment & Securities in South Korea.