ASIA’S export-dependent economies have been plunged into their worst crisis in decades as the global recession saps demand for the region’s consumer electronics, cars and semiconductors.
Japan’s manufacturers cut output by a record 10 percent last month and overseas sales plunged 45.7 percent, 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.
“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.
That would 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 it is almost twice as reliant on exports as the rest of the world. That has prompted Asian governments to unveil fiscal stimulus packages worth almost $700 billion to kick-start local consumer and business spending.
Central banks from Tokyo to Mumbai have also been slashing interest rates to stoke domestic demand, 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 Feb. 24 reduced its benchmark rate for a third straight meeting to 2 percent, aiming to bolster an economy that policy makers say faces an increasing risk of contracting this year. The economy last posted an annual decline in 1998.
Thailand’s central bank on Feb. 25 lowered its key policy rate by 50 basis points, to 1.5 percent, adding to its most aggressive string of cuts ever.
India’s gross domestic product expanded 5.3 percent in the three months to Dec. 31 from a year earlier, the weakest pace since 2003, and Malaysia’s economy grew 0.1 percent last quarter, the weakest pace since 2001.
Southeast Asia’s third-largest economy may shrink 4 percent in 2009, Nomura Holdings Inc. said last week, which would be the worst performance in 11 years.
Some Asian economies are already in recession.
Hong Kong’s economy shrank a seasonally adjusted 2 percent in the fourth quarter from the previous three months, the government reported Feb. 25. That was the third straight quarter-on-quarter contraction.
Hong Kong’s slump is deeper than during 2003, when severe acute respiratory syndrome killed 299 people in the city.
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 percent 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 percent last quarter, the steepest decline since 1998. Industrial production fell an unprecedented 18.6 percent in December, and Asia’s fourth-largest economy lost 103,000 jobs last month, the biggest drop in more than five years.
Finance Minister Yoon Jeung Hyun on Feb. 10 said South Korea may contract about 2 percent this year, a reversal from the government’s prediction in December of 3 percent growth.
“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.” –Michael Dwyer, Bloomberg
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