Asia’s Economies Stumble as Global Slump Hits Exports

By Michael Dwyer

Feb. 27 (Bloomberg) -- Japan’s manufacturers cut production by a record in January and the Indian economy grew last quarter at the weakest pace since 2003 as Asia’s export-reliant nations are pummeled by the global recession.

Japanese industrial output plunged 10 percent last month from December, the Trade Ministry said today in Tokyo. India’s gross domestic product expanded 5.3 percent in the three months to Dec. 31 from a year earlier, less than the 6.1 percent expected by economists surveyed by Bloomberg, the statistics agency said in New Delhi.

“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 it 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 percent 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.

Currencies Fall

Asian currencies declined this month, with South Korea’s won slumping to an 11-year low and the Indian rupee dropping to a record today, on concern sliding exports and shrinking economies will deter foreign investment.

Japan’s overseas sales plunged 45.7 percent 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 Feb. 24 reduced its benchmark rate for a third straight meeting to 2 percent, 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, Malaysia

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 cuts ever.

Figures due to be released today are forecast by economists surveyed by Bloomberg News to show Malaysian growth weakened in the fourth quarter.

Malaysia’s economy probably expanded 1.5 percent last quarter, the weakest pace since 2001, according to the median forecast of 17 economists surveyed by Bloomberg. 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.

Record Low

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 U.S. 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.”

To contact the reporter on this story: Michael Dwyer at Mdwyer5@bloomberg.net