Since mid 2007, Asian economies were believed to have been decoupled from the US economy and one hoped that the US recession would not dampen the growth story of emerging Asia. As the forecasts of recession have become a reality, one is not sure about the extent of its impact on Asia. Can Asia survive despite the recession in the US? It is more likely that Asia will feel the heat of the US meltdown, but it may not be as severe as the one in the aftermath of 2001 US recession, as Asia was then completely dependent on the global superpower. The reasons why Asia is stronger today but not immune to the crisis in the US have been discussed in the article.

In mid 2007, many economists and market analysts were confident that despite the impending recession in the US, Asian economies would be able to run on their own steam. The buzz word was `decoupling'. Since then the US recession has become a reality and the picture has largely changed from `gloom to doom'. In view of this much-publicized recession and slow down in the US, the economists have perhaps reduced their optimism. Many have even commented that the Asian economies have `recoupled' and decoupling idea was only a myth.

In the debate over decoupling and recoupling, let us at the outset understand why decoupling was actually a possibility. Decoupling would imply that Asian economies, especially emerging economics have widened to such an extent that exports to the US are no longer their sole growth drivers. In fact, it was seen that despite an impending slowdown in the US economy, growth rates in these emerging economies were largely healthy. Even financial markets shrugged off the US stock indices as most Asian bourses were bullish. This gave rise to the idea that the phrase. `When US sneezes, rest of the world catches a cold' is perhaps a matter of history. The economic logic suggested that the US slowdown was a result of a housing market slowdown which was a country-specific crisis rather than a global one and hence all growing economies could be insulated from it.

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