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ASIAN ECONOMIES

Bumpy road ahead

Asia News Network
(CONTINUED FROM MAY 13)
With the spillovers from the US financial crisis affecting Asian economies in the first quarter, Thailand, Vietnam, Taiwan and Cambodia are all set for a slow drive on bumpy roads.
Thai economy could fall about three percent for the whole year, without additional economic and political risk factors eroding domestic demand and exports. It was expected to mark a positive growth in previous forecast.
Vietnam's economic growth slowed to an estimated 3.1 percent in the first quarter from 5.7 percent in the fourth quarter of 2008 as a result of the global economic contraction as well as the tight monetary policy of2008.
Taiwan's exports, which contribute to a large portion of its GDP, fell by 35.7 percent year-on -year in March, followed by a drop of 28.6 percent in February and a whopping 44.1 percent in January, the finance ministry said.
The Cambodian downturn is caused by serious impact of the global crisis on the garment sector, construction and tourism, which along with agriculture are main growth factors for the country's economy.
The Thai economy would possibly register a year-on-year contraction of five percent in the first quarter of this year, the lowest pace it could be in this round of economic downturn.
Government spending and net exports--despite export value sharply contracted--were key engines to help keep the economy not go deep down. The government economic stimulus package, both populist policy and infrastructure investment, is yet to bear results.
The economy could fall about three percent for the whole year, without additional economic and political risk factors eroding domestic demand and exports. It was expected to mark a positive growth in previous forecast.
Retail trade-related sectors have been adversely affected by the economic slowdown less than other sectors. Consumers continue to need non-durable goods for living while postpone durable goods, luxurious products and unnecessary expenses for a while.
The Bank of Thailand's (BoT) Assistant Governor Duangmanee Vongpradhip said the year-on-year economic contraction would be in the largest pace in the first quarter. It would improve in the second and third quarters before picking up with positive growth in the last quarter.
In the fourth quarter of last year, the economy registered a negative growth for the first time since the 1997 economic crisis, with 4.3 percent year-on-year contraction.
According to the BoT's fan chart, the economy would drop in its base-line scenario of five percent in the first quarter.
It would continue to fall about 4.2 percent in the second quarter, three percent in the third quarter but turn around to grow 3.4 percent in the fourth quarter.
However, the economy would possibly get worse than the base-line projection as the fan chart has indicated downside risk to the economy.
The seasonally-adjusted quarter-on-quarter economy was expected to slightly decrease in the first quarter. It would post a positive growth in the rest of the year, according to Duangmanee.
The economy marked a sharp drop of 6.1 percent in last year's fourth quarter.
National Economic and Social Development Board's (NESDB) Secretary General Ampon Kittiampon said the economy could shrink more than 4-5 percent in the first quarter, indicated by lower-than-expected economic indicators.
The economy would drop more than two percent for the entire year, compared with one percent contraction in previous projection, he said.
The think-tank agency is to announce actual economic figures for the first quarter and revise the economic growth projection for the entire year in May 25.
The government's stimulus package could not be beneficial to the economy in the first quarter as the government has just come into office.
The 2,000 baht government gift cheques have just been distributed in April while other infrastructure investment projects have not been kicked off.
However, five measures of populist policies extended from the previous government, such as free bus fare, have helped maintain purchasing power of customers whose employment status has been at risk
Vietnam's growth was positive for the first quarter of 2009 but faces substantial near-term challenges stemming from the sharp deterioration of the global economy.
Vietnam's economic growth slowed to an estimated 3.1 percent in the first quarter from 5.7 percent in the fourth quarter of 2008 as a result of the global economic contraction as well as the tight monetary policy of2008.
Both the agriculture and industryconstruction ground almost to a halt with the former growing by just 0.6 percent and the latter 1.4 percent.
The services sector also slowed but managed to expand at 5.6 percent.
The IMF reduced its economic forecast to 4.8 percent in March from 5 percent in December because of weakening capital inflows, exports and remittances from overseas.
The World Bank lowered its estimate to 5.5 percent on April 7 from 6.5 percent in December and the ADB has forecast growth of4.5 percent.
The government is striving for an economic growth of 5 to 5.5 percent this year with higher growth in 2010. But the National Assembly, which is eyeing a 6.5 percent growth, is yet to approve the new target pendingits next meeting.
Vietnam economy grew at its lowest rate for nine years in 2008 - 6.2 percent against 8.5 percent in 2007.
After peaking at 28.3 percent in August 2008, inflation has fallen as quickly as it rose with year-on-year headline inflation for March at 11.2 percent, the lowest since December 2007.
It was almost 14.5 percent year-on-year for the first quarter as consumer prices continued to ease from their record highs. But much of the 14.47 percent hike stemmed from a sharp rise in the cost of food--up more than 22 percent against the first three months of2008.
Inflation eased to 9.2 percent year-on-year in April as telecommunications and transportation cost fell.
The General Statistics Office, which often issues the data before the end of the month based on estimates, reported that higher costs for food, beverages, home appliances and garments and textiles were the major driver of April's inflation.
Standard Chartered Bank economists now forecast that Vietnam's inflation could drop to low single digits - about 2 percent --in the second half of the year provided that oil and food prices remain stable.
The government has a tailored comprehensive stimulus packages totalling $8 billion to dampen the impact of the global crisis on the country's export-led economy.
About $1 billion will be used for a onetime cash payment to poor households, increasing infrastructure spending, reducing taxes, subsidising short-term interest
rates for borrowing working capital and a guaranteeing credit guarantees to help businesses in selected industries not only to survive but reduce prices and retain jobs.
Taiwan's economy may shrink 2.97 percent in 2009 in what would be the island's worst economic performance ever, the statistics bureau said.
The pessimistic estimate by the Cabinetlevel Directorate General of Budget, Accounting and Statistics (DGBAS) came after the domestic economy contracted by 8.36 percent year-over-year in the fourth quarter of 2008, the largest-ever quarterly drop in history, due to the global economic downturn.
In the DGBAS's latest forecast, released in mid-February, GDP will continue to decline in the first three quarters of this year, shrinking by 6.51 percent, 6.85 percent and 2.67 percent, respectively on a year-on-year basis.
If the DGBAS predictions were accurate then it would be the first time the domestic economy had contracted for five consecutive quarters.
Things might improve by the fourth quarter, during which the economy is expected to grow 4.5 percent, according to the DGBAS. That, however, will still put the country's economic growth in the negative territory.
DGBAS based its forecasts on a possible plunge of 20.1 percent in exports for this year amid the current downturn.
Private spending is estimated to edge up by 0.82 percent, but fixed investments made by the government, state-run enterprises and private firms would fall by 17.76 percent, the agency said.
The statistics bureau had previously forecast this year's growth to be two percent, yet it had to change its prediction after exports tumbled for the first months of 2009.
Exports, which contribute to a large portion ofTaiwan's GDP, fell by 35.7 percent year-on-year in March, followed by a drop of
28.6 percent in February and a whopping 44.1 percent in January, the finance ministry said.
The DGBAS will release its official first quarter figures and new predictions for the year on May 21.
A local think tank, meanwhile, has already given its outlook for 2009, saying Taiwan’s economy will grow a marginal 0.11 percent this year.
The Taiwan Institute of Economic Research (TIER) said last month Taiwan's exports are projected to shrink by a much smaller 9.19 percent in 2009, while imports are likely to contract by 13.87 percent, adding trade surplus will reach S25.05 billion for the year.
Although government investment will increase by 26.96 percent — thanks to the administration's efforts to promote public construction projects - fixed investment by the private sector is expected to drop by 11.53 percent as businesses delay or cut back in their capital expenditure, TIER said.
In terms of private consumption, TIER predicted that there would be a slight growth of 0.62 percent, as the forced unpaid leave policy and workforce reduction by local businesses are taking a heavy toll on the public's purchasing power.
The economy has been hit badly in the first quarter of 2009, ending an economic growth, which used to be at two digits before dropping to 6.8 percent in 2008. Economists see 2009 as the worst year for the country s economy in this decade.
World Bank predicted that Cambodian economic growth will contract -1 percent this year due to the financial crisis although the economics and finance ministry sees a growth of up to 2 percent
The downturn is caused by serious impact of the global crisis on the garment sector, construction and tourism, which along with agriculture, are main growth factors for the Cambodian economy.
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