Global General

Special

Newsmaker

Asia Pacific

America

Middle East

Europe

Africa

Asia facing growth shock as economic slump deepens

(China Daily)
Updated: 2009-01-03 09:17

Singapore's economy may shrink more than previously forecast in 2009, foreshadowing a deepening slump throughout the region as exports and manufacturing contracted further in China, South Korea and Australia.

China's manufacturing declined for a fifth month in December, South Korea's exports fell by more than 15 percent for a second month, and Australian manufacturing shrank, reports on Friday showed.

Workers assemble hand-held inventory computer devices on the assembly line at the Venture Corp factory in Singapore. [Agencies]

Singapore's economy may contract as much as 2 percent this year, worse than a November prediction, the government said on Friday.

"Asia is facing a growth shock with indicators suggesting the contraction will be as sharp as during the depth of the Asian financial crisis," said Frederic Neumann, an economist at HSBC Holdings Plc in Hong Kong.

"There will be more fiscal pump-priming and monetary-policy loosening forthcoming over the next three to four months."

Public spending packages and interest-rate cuts by governments and central banks around the world have failed to reverse a worldwide economic slump and the worst credit crunch in seven decades.

Asia's export-driven economies are slowing as demand for their products diminishes amid recessions in the US, Japan and Europe.

Overseas shipments by India are also falling, and Vietnam this week said its 2008 economic expansion was the weakest in nine years.

Among Southeast Asia's three biggest economies, Thailand says it's at risk of falling into a recession this quarter, while Indonesia and Malaysia expect growth this year to be the slowest since 2001.

'Tough time'

The World Bank last month predicted international trade will shrink in 2009 for the first time in more than 25 years.

Exports account for about 32 percent of Asia's gross domestic product, according to the World Bank. Japan, China's Hong Kong, Singapore and New Zealand are already in recession.

Singapore's recession this year may be the worst in its 43- year history, Citigroup Inc economist Kit Wei Zheng wrote in a note.

"It's going to be a tough time across Asia," said Alvin Liew, an economist at Standard Chartered Plc in Singapore. "We don't see any bright spots in the Singapore economy, especially in the first half."

Singapore's Chartered Semiconductor Manufacturing Ltd and Taiwan Semiconductor Manufacturing Co, two of the world's three largest custom-chipmakers, last month lowered their earnings projections amid delayed orders and a slump in demand.

In South Korea, President Lee Myung-bak on Friday pledged to help bring down interest rates amid concern the economy may enter its first recession since 1998 by June as exports slow and consumer spending weakens.

Overseas shipments fell 17.4 percent in December, after a 19 percent decline the month before.

Worst to come

"We won't waste a minute or a second in examining economic conditions every day and coming up with measures," Lee said. "Most of all, we have to ensure money flow in the markets."

The worst global financial crisis since the Great Depression in the 1930s will deteriorate further, said New York University Professor Nouriel Roubini.

"The entire global economy will contract in a severe and protracted U-shaped global recession that started a year ago," Roubini said. "A hard landing for emerging-market economies may also be at hand."

Still, HSBC's Neumann forecasts a rebound in Asian growth in the second half of 2009 as government spending boosts domestic consumption.

"Governments across the region have promised a very significant fiscal stimulus," Neumann said.

"We believe that Asia will be able to generate enough domestic demand to lead a recovery in growth."

Agencies