Asia remains "the best part of the world to be in" as it has a very "superior" economic growth story, said Kevin Grice, senior international economist at Capital Economics on CNBC Wednesday.
Although Grice acknowledged that Asia's economies would see some slowdown, he did not think there would be a slump.
"The most likely outlook is that it slows to a sustainable pace... over the medium-to-long term," he said.
Data on Wednesday further supported the view that Asia's economies were holding up. Australia's economy grew a surprisingly strong 1.2 percentin the second quarter from the previous three months, while China's manufacturing activity expanded for the 18th straight month in August.
China's official Purchasing Managers Index or PMI rose to 51.7 from 51.2 in July. HSBC, which compiles its own version of the index, reported PMI rose to a three-month high of 51.9 from 49.4 in July. Any number below 50 implies a contraction.
Based on the sequential numbers out of China, Grice added that easing growth was good news as this would help keep a lid on asset bubbles.
"The authorities don't have to do much more to slow it down...you will get stimulatory measures, rather than anything like interest rate hikes," he said.
The one good thing Asia has got going for it are its relatively healthy banks, Grice noted.
"The banks in Asia are in reasonably good shape and willing to lend. Also, debt levels generally are quite low in Asia, particularly in the private sector.... so this goes about for increased borrowing."
Chances of a Double-Dip 'Very Small'
As for the U.S. economy, Grice said chances of a double-dip recession are "very small" as they are "very, very rare", however, warned that the road to recovery is still a long, hard toil.
"It is likely to be a very long hard slog of a recovery. A jobless recovery... a period of years... probably where growth is very, very low, where monetary policy has to be very stimulatory."
The U.S. August payrolls report will be closely scrutinized for clues about a recovery. Expectations are for non-farm payrolls to have declined 100,00, according to Reuters analysts. That would make it a third straight month of declines. The unemployment rate is expected to have ticked higher to 9.6 percent in August from 9.5 percent in July.
Grice cautioned that prolonged weakness in the U.S. economy would leave it vulnerable to new shocks, especially in housing.
"One of the potential new shocks out there, is that...we get a double-dip recession in terms of the housing market. That does look very likely."
Difficult Months Ahead for Stocks
September is going to be as difficult as October for equities, as was the case in August, Grice noted, adding that economic data in the U.S. and Europe are expected to stay "disappointing".
"I think bonds will continue to do well," he said.
"The next catalysts to set markets higher? Probably (third-quarter) earnings in the U.S."