Asian economies on a bumpy road
Saturday, 23 May 2009
Syed Jamaluddin
WITH the spill-over from the US financial crisis affecting the Asian economies in the first quarter of this year, these countries are set for a slow drive on bumpy roads. In recent figures, the International Monetary Fund (IMF) expects Asia to grow at an average rate of 1.3 per cent this year whereas the Asian Development Bank (ADB) estimate is 3.4 per cent. The US and other advanced economies may not immediately respond to stimulus packages. Therefore, the Asian governments need to boost domestic demand. The Asian countries must rely more on domestic consumption to keep their economies afloat. Asia's growth path will continue to run parallel to that of the global economy. A lingering recession in the US and Europe would continue to take its toll on the household. Sales by manufacturing and export sectors in Asia would be adversely affected. Governments in the region have to use both fiscal and monetary measures to beef up domestic demand. National governments must continue the stimulus programmes.
China's economy expanded by 6.1 per cent in the first quarter of this year. This was 0.7 per cent lower than that of the previous quarter. Compared with its 9.0 per cent growth in 2008 and 13 per cent in 2007, the Chinese economy has indeed slowed far below its long-term growth trend. Given the recessions around the world, the overall national economy has shown positive changes. Tax reduction and subsidies are working on boosting consumption. Fiscal subsidies for rural consumers have increased demand for home appliances. It is expected that China will eventually step out of the global crisis.
India continues to grapple with the ill effects of the global meltdown. Most firms are reporting weak numbers, falling demand and lower realisations. The Indian economy is likely to remain weak in the first quarter and slowly pick up thereafter. It is expected to show fairly strong recovery in the second half of the fiscal year. Its growth rate is projected around 7.0 per cent. Favourable factors of the Indian economy include comfortable external payment situation, resilience of enterprises, healthy bank balance sheets and dominant dependence on domestic savings for investment.
Pakistan's economy has shown a gradual recovery. Injection of soft loan from World Bank and record remittances helped increase foreign exchange reserves of that country. Its GDP growth forecast was cut to 2.5-3.5 per cent from an earlier target of 3.5-4.5 per cent. The original target was 5.5 per cent. The government of Pakistan earmarked 34 billion rupees for income support programme. Large scale manufacturing sector in Pakistan registered negative growth.
The Thai economy would possibly register a contraction of five per cent in the first quarter of this year. The government's economic stimulus package there is yet to bear results. The Thai economy could fall by about three per cent for the whole year. It would pick up with positive growth in the last quarter.
Vietnam's economic growth slowed to 3.1 per cent in the first quarter. Its government has a tailored comprehensive stimulus package totalling $8.0 billion to dampen the impact of the global crisis on the country's export-led economy.
Taiwan's economy may shrink by 2.9 per cent in 2009. This would be the island's worst economic performance. Things might improve by the fourth quarter, during which its economy is expected to grow 4.5 per cent. Private spending there is estimated to edge up by 0.82 per cent but fixed investment would fall by 17.76 per cent.
Cambodia's economy has been hit badly in the first quarter of 2009. The downturn is caused by serious impact of the global crisis on the garment sector, construction and tourism, which along with agriculture, are the main growth factors for the Cambodian economy.
Singapore's economy is set to contract anywhere between 6.0 and 9.0 percent. In the first quarter, GDP shrank by 19.7 per cent. The good news is that job loss has dropped noticeably. Singapore unveiled a$20.5 billion resilience package this year to help firms improve cash flow and preserve jobs. The measures put in place are working and the economy of Singapore has reasons to be overcoming the downturn. Its silver lining is that lower oil and food prices should rein in inflation.
Falling exports and job losses as a result of the global economic meltdown slowed the economic growth of the Philippines in the first quarter of this year. Its economy grew by 2.1-3.1 per cent in the first three months of the year. The economy is expected to post a positive growth rate.
The Korean economy grew by 0.1 per cent in the first quarter and escaped the technical definition of a recession. Government's stimulus package and central bank's aggressive monetary policy there are aiding the economy. Its policymakers cautioned against premature optimism.
The government has poured about $37.2 billion in fiscal spending, tax cuts and liquidity injections into the financial market.
Indonesia's economy expanded by 4.5 per cent in the first quarter, even though its exports contracted by almost 35 per cent. This growth was lower than the 6.2 per cent recorded a year earlier. Private consumption has received a significant boost from spending on campaigning by political parties for the April parliamentary election. Fiscal stimulus amounted to $6.1 billion. The government estimates the Indonesian economy to end the year with growth range of 4.0 to 4.5 per cent.
The Government of Japan expects the economy to contract by 3.3 per cent in the current fiscal year. Their export market is rapidly shrinking. The government has introduced several stimulus packages. Without the stimulus, the Japanese economy could contract by 5.2 per cent. Japan's export may fall by 27.6 per cent, while the industrial production may plunge by 23.4 per cent. Unemployment rate there may rise to 5.2 per cent. The highest jobless rate on record is 5.4 per cent.
Lao government has forecast the economy to grow by 7.5 per cent, which is lower by 0.5 per cent. To address the negative impact of global economic recession, the Lao government has introduced a number of measures including the suspension of value-added tax. Its measures are aimed at facilitating investment and business growth to boost economic development, create employment and raise income levels.
Malaysia's economy is seen to have contracted by 3.5 per cent. This is due to drastic drop in external demand and fall in industrial output.
Despite the global recession, Bangladesh economy remains resilient. The projected growth rate is 5.88 per cent, which is slightly lower than last year's 6.1 per cent. Although exports and remittances inflow continue to be strong, there are signs that the recession has started having its impact. Overall export growth has recorded a monthly decline of 3.0 per cent by February, 2009. The government has announced a $480 million stimulus package
Over the long horizon, Asian economies are at a risk of a structural decline in demand from advanced economies. Therefore, these countries must rely more heavily on domestic consumption to keep their economies afloat.
The wrier is an economist and columnist
WITH the spill-over from the US financial crisis affecting the Asian economies in the first quarter of this year, these countries are set for a slow drive on bumpy roads. In recent figures, the International Monetary Fund (IMF) expects Asia to grow at an average rate of 1.3 per cent this year whereas the Asian Development Bank (ADB) estimate is 3.4 per cent. The US and other advanced economies may not immediately respond to stimulus packages. Therefore, the Asian governments need to boost domestic demand. The Asian countries must rely more on domestic consumption to keep their economies afloat. Asia's growth path will continue to run parallel to that of the global economy. A lingering recession in the US and Europe would continue to take its toll on the household. Sales by manufacturing and export sectors in Asia would be adversely affected. Governments in the region have to use both fiscal and monetary measures to beef up domestic demand. National governments must continue the stimulus programmes.
China's economy expanded by 6.1 per cent in the first quarter of this year. This was 0.7 per cent lower than that of the previous quarter. Compared with its 9.0 per cent growth in 2008 and 13 per cent in 2007, the Chinese economy has indeed slowed far below its long-term growth trend. Given the recessions around the world, the overall national economy has shown positive changes. Tax reduction and subsidies are working on boosting consumption. Fiscal subsidies for rural consumers have increased demand for home appliances. It is expected that China will eventually step out of the global crisis.
India continues to grapple with the ill effects of the global meltdown. Most firms are reporting weak numbers, falling demand and lower realisations. The Indian economy is likely to remain weak in the first quarter and slowly pick up thereafter. It is expected to show fairly strong recovery in the second half of the fiscal year. Its growth rate is projected around 7.0 per cent. Favourable factors of the Indian economy include comfortable external payment situation, resilience of enterprises, healthy bank balance sheets and dominant dependence on domestic savings for investment.
Pakistan's economy has shown a gradual recovery. Injection of soft loan from World Bank and record remittances helped increase foreign exchange reserves of that country. Its GDP growth forecast was cut to 2.5-3.5 per cent from an earlier target of 3.5-4.5 per cent. The original target was 5.5 per cent. The government of Pakistan earmarked 34 billion rupees for income support programme. Large scale manufacturing sector in Pakistan registered negative growth.
The Thai economy would possibly register a contraction of five per cent in the first quarter of this year. The government's economic stimulus package there is yet to bear results. The Thai economy could fall by about three per cent for the whole year. It would pick up with positive growth in the last quarter.
Vietnam's economic growth slowed to 3.1 per cent in the first quarter. Its government has a tailored comprehensive stimulus package totalling $8.0 billion to dampen the impact of the global crisis on the country's export-led economy.
Taiwan's economy may shrink by 2.9 per cent in 2009. This would be the island's worst economic performance. Things might improve by the fourth quarter, during which its economy is expected to grow 4.5 per cent. Private spending there is estimated to edge up by 0.82 per cent but fixed investment would fall by 17.76 per cent.
Cambodia's economy has been hit badly in the first quarter of 2009. The downturn is caused by serious impact of the global crisis on the garment sector, construction and tourism, which along with agriculture, are the main growth factors for the Cambodian economy.
Singapore's economy is set to contract anywhere between 6.0 and 9.0 percent. In the first quarter, GDP shrank by 19.7 per cent. The good news is that job loss has dropped noticeably. Singapore unveiled a$20.5 billion resilience package this year to help firms improve cash flow and preserve jobs. The measures put in place are working and the economy of Singapore has reasons to be overcoming the downturn. Its silver lining is that lower oil and food prices should rein in inflation.
Falling exports and job losses as a result of the global economic meltdown slowed the economic growth of the Philippines in the first quarter of this year. Its economy grew by 2.1-3.1 per cent in the first three months of the year. The economy is expected to post a positive growth rate.
The Korean economy grew by 0.1 per cent in the first quarter and escaped the technical definition of a recession. Government's stimulus package and central bank's aggressive monetary policy there are aiding the economy. Its policymakers cautioned against premature optimism.
The government has poured about $37.2 billion in fiscal spending, tax cuts and liquidity injections into the financial market.
Indonesia's economy expanded by 4.5 per cent in the first quarter, even though its exports contracted by almost 35 per cent. This growth was lower than the 6.2 per cent recorded a year earlier. Private consumption has received a significant boost from spending on campaigning by political parties for the April parliamentary election. Fiscal stimulus amounted to $6.1 billion. The government estimates the Indonesian economy to end the year with growth range of 4.0 to 4.5 per cent.
The Government of Japan expects the economy to contract by 3.3 per cent in the current fiscal year. Their export market is rapidly shrinking. The government has introduced several stimulus packages. Without the stimulus, the Japanese economy could contract by 5.2 per cent. Japan's export may fall by 27.6 per cent, while the industrial production may plunge by 23.4 per cent. Unemployment rate there may rise to 5.2 per cent. The highest jobless rate on record is 5.4 per cent.
Lao government has forecast the economy to grow by 7.5 per cent, which is lower by 0.5 per cent. To address the negative impact of global economic recession, the Lao government has introduced a number of measures including the suspension of value-added tax. Its measures are aimed at facilitating investment and business growth to boost economic development, create employment and raise income levels.
Malaysia's economy is seen to have contracted by 3.5 per cent. This is due to drastic drop in external demand and fall in industrial output.
Despite the global recession, Bangladesh economy remains resilient. The projected growth rate is 5.88 per cent, which is slightly lower than last year's 6.1 per cent. Although exports and remittances inflow continue to be strong, there are signs that the recession has started having its impact. Overall export growth has recorded a monthly decline of 3.0 per cent by February, 2009. The government has announced a $480 million stimulus package
Over the long horizon, Asian economies are at a risk of a structural decline in demand from advanced economies. Therefore, these countries must rely more heavily on domestic consumption to keep their economies afloat.
The wrier is an economist and columnist