The forecasts released yesterday are so far the lowest by any bank or broker for those three countries. The comments come a day after the International Monetary Fund underscored the dismal state of Asia's economies by cutting its growth forecast for the region to just 2.7 per cent from a November forecast of 4.9 per cent.
CLSA expects gross domestic product in South Korea, Asia's fourth-largest economy, to shrink by seven per cent this year, reflecting falling exports, consumption and investment. Its previous forecast was for 1.7 per cent contraction.
It expects Taiwan's economy to shrink by 11 per cent in 2009, making it the worst performer in Asia and saying it was "tying with Singapore as the most vulnerable economy in the region". Its previous forecast was for a contraction of 2.7 per cent.
Singapore will be hit by falling trade, declining property prices and its exposure to the financial industry, CLSA said, with GDP likely to shrink 10 per cent, down from its original forecast of a 2.6 per cent decline. CLSA maintained its previous growth forecast for China at 5.5 per cent. It lowered its view on Indonesia, predicting growth of less than one per cent.
The Taipei Times today noted:
Nonetheless, the important issue is not how accurate CLSA’s figure is, but the main reason behind its gloomy forecast: a collapse in the nation’s exports.
People have to face the cruel reality that our economy depends too heavily on exports, which account for about 60 percent to 65 percent of GDP, and it may be a tipping point for the nation to seriously reconsider how to adjust its fundamental economic and financial structures to address Taiwan’s long-term economic development. Second, those who have put their faith in China’s economy should understand that its exports and manufacturing output have continued to fall in recent months, and the global economic slowdown has yet to bottom out.
Obviously, years of investment in China has made Taiwan overly dependent on it, and December’s plunge of 54 percent in shipments to China including Hong Kong, which accounted for about 40 percent of the nation’s exports, should sound alarm bells.
Taiwan took a double hit, first from factories offshoring, and then, from the drop in exports due to the economic crisis. Can can China rescue us? The jury is still out, but I expect that things in China are a lot worse than the government there is letting on (as this piece explains). Taiwan's dependence on exports is inescapable, but its dependence on China is stupid, short-sighted, and unnecessary. Max Hirsch from Kyodo reports on domestic developments in Taiwan -- our
The Cabinet-level Council for Planning and Economic Development, or CEPD, initially estimated the plan's contribution to GDP growth this year to be about 0.6 percent, but later revised that estimate to one percent, citing a ''multiplier effect,'' as the vouchers change hands like cash and spread their impact across the economy.It's hard to imagine that the CEPD's upward revision of the effects of the voucher program was anything but political, since the organization of course knows about multiplier effects. The full extent of the program's effect will not be known until September, when the vouchers are withdrawn from circulation, explained Hirsch. A voucher program for education is in the offing.
''So far so good,'' said Steve Lin, an economics professor at National Chengchi University (NCCU) in Taipei, referring to the plan since it took effect Jan. 18.
''My own expectation is that an extra one percent GDP growth because of the plan is possible,'' Lin added.
Exports have plummeted 40%, while unemployment is over 5% (but these unemployment numbers underreport unemployment, just as they do in the US). Take note: the CLSA report correctly pointed to economic problems other than falling exports that are also having their impact: falling domestic and government spending. The investment firm UBS commented several years ago that the fall-off in infrastructure spending had hit the island's domestic economy hard. The government would have been much better off spending that $2.5 billion voucher outlay on infrastructure, where the multiplier effects would have been much greater.
Whatever the actual figures, 2009 is going to be a grim year here in Taiwan.