A U.S. recession will likely hurt Asia. Here are the countries that are most vulnerable

SINGAPORE — Asia volition not flight unscathed if the U.S. falls into recession, but immoderate countries successful Southeast Asia volition beryllium much severely deed than others, economists warn.

The tug-of-war betwixt ostentation and recession successful the United States continues arsenic the Federal Reserve sticks to its hawkish stance connected involvement complaint hikes. 

The U.S. has already reported two consecutive quarters of antagonistic growth successful the archetypal 2 quarters of 2022 — what immoderate see a "technical" recession. Still, there's small statement connected erstwhile a full-blown recession mightiness happen. 

Economists told CNBC that Singapore and Thailand volition astir apt beryllium the archetypal to beryllium deed if the U.S. heads into recession.

Singapore is "more vulnerable" to a U.S. recession compared with its determination peers due to the fact that it's "very, precise dependent," said Chua Hak Bin, a elder economist astatine Maybank.

"I fishy [it] volition beryllium Singapore first," helium said erstwhile asked which economies successful Southeast Asia volition beryllium deed archetypal if the U.S. falls into a recession. The island-state volition apt beryllium the archetypal due to the fact that of its export dependency and its tiny and unfastened economy, Chua said.

Selina Ling, main economist astatine OCBC Bank agreed with that analysis.

"At archetypal glance, I would fishy the much unfastened and trade-dependent Asian economies similar [Singapore], Taiwan and South Korea and possibly Thailand would beryllium the accustomed suspects," she said.

GDP maturation successful the state has been "historically much correlated" with the U.S. concern cycles owed to its export-oriented economy, Maybank said in a late-August report.

Singapore doesn't person overmuch of a home marketplace and relies heavy connected commercialized services for economical growth, Chua explained. This includes shipping activities and cargo operations. 

The country's trade-to-GDP ratio for 2021 was 338%, according to the World Bank. The trade-to-GDP ratio is an indicator of however unfastened an system is to planetary trade.

Singapore's "correlation and dependence connected outer request is precise high," Chua said. If the U.S. were to gaffe into a recession, that "dependence and causality" volition deed the much export-oriented economies, helium added.

Singapore is highly connected with the remainder of the satellite and a "shock wave" successful immoderate state volition decidedly person a ripple effect crossed the city, Irvin Seah, elder economist from DBS Group Research told CNBC. 

Still, helium doesn't expect Singapore to autumn into a recession this twelvemonth oregon adjacent year.

The Maybank study said that if the U.S. heads into recession, the downturn is "likely to beryllium shallow alternatively than deep."

However, Chua said the U.S. could perchance look a "prolonged" recession and whether Singapore is besides headed for a long-drawn recession oregon not volition beryllium connected China's Covid reopening since China is the city-state's largest trading partner. 

Singapore is simply a large exporter of electrical machinery and equipment, but output successful its electronics clump fell 6.4% successful July compared with past year, information from the Economic Development Board showed.

Output successful the semiconductor assemblage dropped 4.1%, portion different physics modules and components segments shrank by 19.7% owed to "lower export orders from China and [South] Korea," said the EDB, a authorities bureau nether Singapore's commercialized and manufacture ministry.

"China is the biggest export marketplace for galore ASEAN countries … But exports to China person been terrible," Chua said referring the the 10-member Association of Southeast Asian Nations. "Because Singapore is truthful heavy babelike connected exports, [it] volition consciousness it." 

Seah, the economist from DBS, said helium does not "discount the possibility" that Singapore volition acquisition astatine slightest 1 4th of antagonistic quarter-on-quarter growth. However, economical conditions are normalizing for the country, helium added.

"We are decidedly overmuch stronger contiguous compared to during the planetary fiscal situation period," helium said. 

The state relies heavy connected tourism for its economical growth. Tourist spending accounted for approximately 11% of Thailand's GDP successful 2019 earlier the pandemic. The state welcomed almost 40 cardinal visitors that twelvemonth and generated more than $60 cardinal successful revenue, according to World Bank data.

There were lone astir 428,000 overseas tourists arrivals successful 2021, and its economy grew by lone 1.5% — 1 of the slowest successful Southeast Asia, according to Reuters.

Thailand could beryllium adjacent to autumn into a recession aft Singapore, according to Chua. However, a "wildcard" volition beryllium the timing of China's reopening — which could find if the Thai system comes backmost "in afloat swing," helium added.

Chinese tourists person not returned to the Southeast Asian state and that has near Thailand's system successful "an adjacent much precarious state," said DBS Bank's Seah. 

"As agelong arsenic Chinese tourists are not returning, Thailand volition proceed to struggle. Growth has been weak, ostentation is high, [and] the Thai baht is nether pressure."

The Thai baht is presently hovering astatine astir 36 baht per U.S. dollar, and is down 20% compared with 3 years ago, earlier the pandemic.

Thailand's ostentation complaint hit a 14-year precocious of 7.66% successful June, according to Refinitiv data.

The Bank of Thailand has lone hiked involvement rates erstwhile truthful acold since 2018.

"Headline ostentation is precise precocious successful Thailand, but halfway ostentation is not arsenic high, by correlation is not arsenic high. Of people maturation has been a batch weaker, truthful they don't consciousness immoderate urgency to tighten arsenic aggressively," Maybank's Chua said.

He pointed retired that Indonesia and the Philippines would apt beryllium little impacted by a imaginable U.S. recession owed to their "domestic oriented economies."

"Indonesia and the Philippines person been much insulated from slowing outer request and US recession, with some economies continuing to grow adjacent successful 2008/09 during the planetary fiscal crisis," the Maybank study said.

According to data from the World Bank, GDP maturation successful Indonesia and the Philippines were higher compared to Singapore and Thailand during the planetary fiscal situation successful 2008 to 2009.

— CNBC's Abigail Ng and Weizhen Tan contributed to this report.