Asia Exports Slowdown Adds Pressure for Growth Measures
An Asian export slump exacerbated by Europe’s sovereign-debt crisis and an uneven recovery in the U.S. is putting pressure on policy makers to pledge stimulus measures to boost growth.
China’s exports rose less than estimated in April, while Philippine shipments unexpectedly fell in March, reports showed. Malaysia said today industrial production expanded in March at less than a fifth the pace economists predicted, a day after a report showed exports fell for the first time since 2009. Downside growth risks remain “significant,” the Bank of Korea said today as it held interest rates for an 11th meeting.
Growth prospects for export-dependent Asian nations are under threat following an inconclusive Greek election that increases the risk of a worsening European debt crisis and a slowdown in China and disappointing U.S. jobs data damp the outlook for global demand. Gains in the yuan against the dollar have ground to a halt this year, while India and Australia have lowered borrowing costs more than forecast at their most recent meetings in attempts to bolster their economies.
“We are seeing entrenched weakness and it is going to be a bumpy ride for Asian exports” amid easing demand from Europe, said Vishnu Varathan, an economist at Mizuho Corporate Bank Ltd. in Singapore. “Our sense is that many Asian central banks have only suspended, not yet conclusively terminated, the easing cycle for this year. As external headwinds pick up, we think there will be scope for further and in most cases, modest policy easing.”
Asian stocks are heading for their worst week in almost six months as political changes in France and growing instability in Greece threaten to derail austerity plans and worsen Europe’s debt crisis. The MSCI Asia Pacific Index (MXAP) was little changed as of 1:30 p.m. in Tokyo after closing at its lowest since January yesterday.
Diminishing European demand as the euro region veers toward a recession is particularly troubling for countries from Thailand to South Korea, where shipments make up the equivalent of half or more of gross domestic product. Asian countries need to create more demand in the region, rather than relying heavily on export-driven growth, Finance Minister Bahk Jae Wan said in a speech prepared for a forum in Seoul.
China’s overseas shipments rose 4.9 percent from a year earlier, the customs bureau said on its website today. That compares with the 8.5 percent median estimate in a Bloomberg News survey of 33 analysts. Import growth of 0.3 percent trailed forecasts for a 10.9 percent gain.
“The European weakness will continue to weigh on China’s export growth in the coming months,” said Zhang Zhiwei, chief China economist for Nomura Holdings Inc. in Hong Kong. China may have to loosen policies further as the export outlook remains “weak,” with a potential cut in banks’ reserve requirements this month and an increase in fiscal spending during the quarter, he said. Pressure for yuan appreciation will be limited by an anticipated narrowing in the trade surplus, Zhang said.
South Korea will take action to stabilize financial markets if needed as uncertainty has risen over Europe due to recent elections in France and Greece, Bahk said.
The Bank of Korea kept its benchmark seven-day repurchase rate unchanged at 3.25 percent, as predicted by all 17 economists surveyed by Bloomberg. Indonesia’s central bank held its key rate at 5.75 percent today. Production at Malaysian factories, utilities and mines gained 0.6 percent from a year earlier after rising a revised 8.2 percent in February, the statistics department said today.
Philippine shipments abroad declined 1.2 percent from a year earlier, the National Statistics Office said, compared with a median estimate in a Bloomberg survey for a 10.1 percent increase. The central bank will consider the export performance when deciding its monetary policy stance at its June meeting, Governor Amando Tetangco said.
In Europe, the Bank of England is expected to halt bond purchases at 325 billion pounds ($524 billion), ending a second round of stimulus, according to 43 of 51 economists in a Bloomberg News survey, with the remainder expecting see an increase of at least 25 billion pounds. The official bank rate will be kept at 0.5 percent. France may say manufacturing production fell in March from February, while the U.K.’s probably increased in March, surveys showed.
U.S. jobless claims may be little changed at 368,000 in the week ended May 5 from 365,000 in the preceding week, according to the median of 47 economists surveyed by Bloomberg. The U.S. trade deficit probably widened in March as imports rebounded, with the gap at $50 billion from $46 billion in February, another survey showed.
Export orders signed at the Canton Fair, a trade show in the southern Chinese city of Guangzhou that ran from mid-April to May 5, fell 2.3 percent from a year earlier, the first decline for the semiannual event’s spring exhibition since 2009.
The decline may prompt the government to cut banks’ reserve requirements and boost the construction of low-income housing and funding for infrastructure projects, Bank of America Corp. economists Lu Ting and Hu Weijun said in a note May 7.
China’s trade this year is more balanced than in 2011, Xinhua News Agency reported May 8, citing Commerce Minister Chen Deming. The trade surplus accounted for 2.8 percent of GDP in the first few months of this year, he said at a meeting in Jiangsu province on May 7, according to the report.
LG Chem Ltd. (051910), South Korea’s biggest chemicals maker, last month reported a worse-than-estimated 42 percent decline in first-quarter profit as demand in China waned for materials used to make plastic and synthetic rubber.
“Asia has been relying mostly on exports to advanced economies for growth so far,” South Korea’s Bahk said. “It’s now time for Asia to generate more demand within the region.”
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