Business | Economy
Asia feels heat of recession
Region hit hard by the global economy's worst crisis since the Great Depression.
- Bloomberg
- Published: 23:01 March 1, 2009
Hong Kong, Tokyo, New Delhi, Singapore: Japan's manufacturers cut production by a record in January and economic growth slowed last quarter in India and Malaysia as Asia's export-reliant nations are pummelled by the global recession.
Japanese industrial output plunged 10 per cent in January from December, the Trade Ministry said yesterday in Tokyo. India's gross domestic product expanded 5.3 per cent in the three months to December 31 from a year earlier, the weakest pace since 2003, and Malaysia's economy grew 0.1 per cent, the slowest in seven years.
"The region is suffering from an unprecedented decline in growth as a collapse in exports feeds through to domestic demand," said Nicholas Bibby, an economist at Barclays Plc in Singapore. This will place "increased emphasis on the fiscal channel as governments try to stabilize their respective economies," he said.
Asia is being hit hard by the global economy's worst crisis since the Great Depression as the region is almost twice as reliant on exports as the rest of the world. That's prompted Asian governments to unveil fiscal stimulus packages worth almost $700 billion to kick-start local consumer and business spending.
The MSCI Asia Pacific Index of stocks has fallen 16 per cent this year, its worst start to a year since 1990, as companies from Toyota Motor Corp. to Creative Technology Ltd. forecast record losses and announce plans to eliminate jobs.
Asian currencies fell this month, with South Korea's won slumping to an 11-year low and the Indian rupee dropping to a record, on concern sliding exports and shrinking economies will deter foreign investment.
Japan's overseas sales plunged 45.7 per cent in January from a year earlier, adding to evidence that Asia's biggest economy is in its deepest slump in 60 years. Singapore shrank the most in at least 33 years last quarter and Hong Kong's exports plunged by the most in 50 years in January.
Central banks from Tokyo to Mumbai have responded to weakening growth by slashing interest rates, with borrowing costs in India reduced to record lows and the Reserve Bank of Australia's overnight cash rate at the lowest level in 45 years.
Bank Negara Malaysia on February 24 reduced its benchmark rate for a third straight meeting to two per cent, aiming to bolster an economy that policy makers said faces an increasing risk of contracting this year. The economy last posted an annual decline in 1998.
Thailand's central bank on February 25 lowered its key policy rate by 50 basis points to 1.5 per cent, adding to its most aggressive cuts ever.
Some Asian economies are already in recession.
Hong Kong's economy shrank a seasonally adjusted two per cent last quarter from the previous three months, the government said on February 25. That was the third straight quarter-on-quarter contraction. Hong Kong's slump is deeper than in 2003, when severe acute respiratory syndrome killed 299 people.
Japan's economy shrank last quarter by the most since the 1974 oil shock, and record collapses in exports and production in January suggest the economy won't do any better in the first three months of this year.
The Taiwanese economy contracted an unprecedented 8.36 per cent in the fourth quarter from a year earlier, prompting the island's central bank to cut interest rates to a record low.
The South Korean economy is headed for its first recession in a decade as sales of Korean-made cars, consumer electronics and semiconductors to Europe, the US and China dry up.
South Korea's economy shrank 5.6 per cent last quarter, the steepest decline since 1998. Industrial production fell an unprecedented 18.6 per cent in December and Asia's fourth-largest economy lost 103,000 jobs last month.
"The dynamics in Japan and South Korea and Taiwan are exactly the same: these are very cyclical markets dependent to a huge extent on external demand," said Dwyfor Evans, a strategist at State Street Global Markets in Hong Kong. "That's no longer there."
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