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08/23 07:38

Asia's Slump Deepens; Malaysian GDP Flags, Taiwan Jobless Rises

By Christopher Wellisz

Kuala Lumpur, Aug. 23 (Bloomberg) -- Malaysia joined the ranks of Asian economies that slowed or shrank last quarter, and falling exports in Japan and rising unemployment in Taiwan in July point to a deepening regional slump.

Economies across Asia are stalling as exports of semiconductors and other electronic goods decline. That's caused companies like Fujitsu Ltd., Japan's biggest computer maker, and Taiwan's Acer Inc. to idle assembly lines and fire workers.

Malaysia said today its economy grew 0.5 percent in the second quarter from a year earlier, slowing from 3.1 percent in the first three months of the year. Taiwan's economy shrank 2.4 percent last quarter, the worst performance in 26 years. Singapore is in recession and Japan is expected to follow.

``Asia needs some firming on the export side, or else it could get much more serious,'' said David Cohen, director of economic forecasting at Standard & Poor's MMS International in Singapore. ``With the whole world now slowing down, there's the threat that it becomes self-reinforcing.''

So far, there's little to suggest Asian growth -- sapped by falling orders from the U.S., the biggest buyer of the region's goods -- will rebound soon. The U.S. economy grew in at its slowest pace in more than eight years in the second quarter.

Thailand said today it turned to its second trade deficit in more than three years in July as exports posted their biggest drop in more than five years. Falling exports will probably slow growth this year to 1.8 percent, the central bank said, lowering an earlier forecast of 2 percent to 2.5 percent growth.

Rising Unemployment

Japan's trade surplus shrank a greater-than-expected 48 percent in July. Shares of Advantest Corp. and other manufacturers plunged, sending the main Nikkei 225 stock index to a 17-year low.

``There's no relief in sight for the problems behind the current recession -- weak foreign demand, and in particular, weak demand for exports of electrical machinery equipment,'' said Richard Jerram, the chief economist at ING Baring Securities (Japan) Ltd.

Taiwan said its jobless rate climbed for an 11th straight month to a record 4.7 percent, seasonally adjusted, in July. That's up from 2.9 percent a year earlier. The main TWSE stock index fell 0.6 percent.

Companies across the region are responding to falling exports and shrinking profit by shedding workers.

Taiwan's United Microelectronics Corp., the world's second- biggest made-to-order chipmaker, fired 256 workers in July and turned to a second-quarter loss as falling demand left more than half of its chipmaking machines idle.

`Gloomy'

Gateway Inc., the second-biggest direct seller of personal computers, said earlier this month it may pull out of the Asian and European markets after losing money for three quarters. That could result in the firing of 2,500 overseas workers.

Japan's jobless rate probably rose to a record 5 percent in July, according to economists' estimates, while Korean unemployment rose last month to a three-month high of 3.7 percent.

``We haven't fully felt the effects of unemployment yet,'' Cohen said. ``A run-up in unemployment will pull down consumer spending across Asia.''

Economists, who earlier predicted a U.S. economic rebound would help revive global growth in the second half of this year, are now saying a return to growth will have to wait longer.

``It's looking pretty gloomy across the world,'' said Sharda Dean, an economist at Merrill Lynch in London. ``We won't see (a recovery) until the second quarter of next year.''

http://asia.cnn.com/2001/BUSINESS/asia /08/23/malasia.gdp/index.html

Malaysia posts 0.5% growth in 2Q

By staff and wire reports

KUALA LUMPUR, Malaysia - Malaysia on Thursday came in with second-quarter growth of 0.5 percent over a year ago.

Manufacturing and exports were down sharply. But the figure was better than the 0.2 percent economists had predicted.

It also means that Malaysia skirts recession, a dark cloud slowly spreading a large shadow over Asia in the second quarter.

Singapore has already turned into recession, as has Taiwan. Japan escaped recession when its second quarter figures come out Sept. 7 on a technicality.

On Tuesday, South Korea posted relatively strong second-quarter growth of 2.7 percent. That's better than much of Asia thanks, experts say, to reform efforts that are pushing ahead in that country.

Malaysia will creep along with similar, slight growth in the third quarter, too, Bank Negara Governor Zeti Akhtar Aziz said, in reporting the GDP figures.

He said it would be until the fourth quarter before the country sees a recovery.

The central bank has been forecasting growth of more than 5 percent in Malaysia this year. Private economists say it will do well to beat out 1 percent.

The bank said it would revise its estimates only in October.

Malaysia's stock market rose 1.9 percent, with the Kuala Lumpur composite index ending at 669.86 on Thursday.

Talk had circulated in the trading day that the GDP figures would beat forecasts.

Ahead of the announcement, Enzio von Feil, director of investment research at Commercial Economics Asia, gave a gloomy outlook for Malaysia.

Policies under Prime Minister Mahathir Mohamad's administration are not conducive to growth, he said.

Malaysia also gets 26 percent of its whole GDP from exports to the United States, more than anywhere in Asia.

But its rich resources give it some protection from the world slowdown, he noted. The recent weaker dollar has relieved pressure on its U.S.-pegged currency, the ringgit.

http://asia.cnn.com/TRANSCRIPTS/0108/23/i_ba.01.html

BIZ ASIA

Reaction to Malaysia's Economic Growth Figures

Aired August 23, 2001 - 08:30 ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

DALTON TANONAKA, CNN ANCHOR, BIZASIA: Malaysia's economy grew a half percent in the second quarter year-on-year, down considerably from the previous quarter's more than 3 percent increase. Holding back growth, a nearly 7 percent slump in the manufacturing sector. But the report surpassed analysts' expectations with the expansion, most forecasting a slight contraction from the year before.

Looking ahead, the country's central bank is holding an optimistic view, predicting that Q3 will post similar growth. Hopeful investors drove stocks in Kuala Lumpur up nearly 2 percent ahead of the numbers.

For perspective on the report, we're joined now by Nizam Idris, regional economist with IDEAglobal.com. He's based in Singapore.

Sir, this report better than you expected?

NIZAM IDRIS, IDEAGLOBAL.COM: Well, let's see, we were expecting around 0.3 percent growth, slightly above market expectation, and therefore this number is just slightly above our forecast.

TANONAKA: Well, what held the numbers up? Most were saying or were looking for a contraction. What were the positive signs in the report?

IDRIS: Of course we were expecting government expenditures to be the main driver of growth, and indeed it was; it was actually just the government expenditures that was really strong in the quarter. And apart from that, there's one (UNINTELLIGIBLE), some positive news could come from some good numbers from -- some good numbers from (UNINTELLIGIBLE) capital commission, which is actually just investment.

Well, investment numbers are suggesting that there could be some strong numbers there. And we are quite surprised that it is actually stronger than our expectations. And -- however, we caution it could be maybe because it's just faded in the oil industry, because of the high oil prices. But we'll have a look at the breakdown on the gross fixed capital formation for the quarter to see whether this sort of investment numbers are actually sustainable.

TANONAKA: Well, plus with the government holding up much of these numbers, that's not healthy is it?

IDRIS: It's not actually. Actually, if you look at consumption numbers, private consumption was probably the hardest hit because it was down by around about 4.5 percent on the quarter, and that is actually quite bad, that is actually quite systematic of the current situation where consumption -- confidence is actually dented by the global slowdown. But the government has already announced an incentive (ph) fiscal stimulus in March, and I expect that sort of numbers that we see today to continue to be extended into the second and third and fourth quarter of this year.

So yes, private consumption is very slow, but government is actually (UNINTELLIGIBLE) the economy so that's what you are seeing today.

TANONAKA: So, Nizam, there's nothing you see out, looking ahead third and fourth quarters, that would make the numbers go higher?

IDRIS: Well, actually not, because if you look at the industry breakdown, investor breakdown for the (UNINTELLIGIBLE), it is actually the construction sector that is very, very strong, and that again is reflective of government expenditures. I think also it's another that is actually propping up the economy, and that, again, suggests to me that, you know, these sort of numbers are not the kind of health growth that we are looking for, albeit, at the moment looking at maybe half percent growth for the whole year. It is nothing to be so -- to cheer about really.

TANONAKA: OK, Nizam Idris, IDEAglobal.com, thank you very much for your time.

END