SINGAPORE: The gloom surrounding Asia’s export-driven countries as they deal with worries about a slowing US economy and fears of war in Iraq have disguised an important factor – their exports have actually been strong.
Demand in Asia’s largest market, the US, has held up well, despite a weakening US dollar and data such as consumer confidence and durable goods suggesting exports would drop off towards the end of 2002.
But excess capacity, persistent worries about war and an uncertain economic outlook, mean export growth is not flowing through to broad economic strength. Expectations are that activity and exports will slow early this year.
“People keep asking the question: when is Asia going to recover, when is the US going to recover? The answer is, it did,” said Michael Spencer, chief Asia economist at Deutsche Bank. “The puzzle is why haven’t we seen that translated into much higher growth rates in Asia. And the answer, I think, is that domestically there are still considerable pockets of weakness, considerable pockets of excess capacity in export sectors.”
Most Asian countries posted double-digit export growth in November from a year earlier, with Japan, China, South Korea, Taiwan, Thailand, Hong Kong, Singapore, India and the Philippines all reporting rises of between 15% and 30%.
The November export data may have been boosted by delays caused by the US west coast port lockout. But despite the economic worries and the technology industry downturn, Asia still seems to be exporting what the US and Europe want.
Nonetheless, the ongoing fears of war in Iraq, and the tensions over North Korea restarting its nuclear programme, could undermine exports this year by creating uncertainty in the US and Europe that hinders business investment – and export demand.
Imports in a number of Asian economies are also showing signs of losing some steam, an indicator that regional manufacturing, which often transforms exports for re-export, could slow in early 2003.
There has also been strong growth in intra-regional trade, but analysts are cautious about reading too much into that, particularly ideas that China’s stunning growth will establish it as a counter for Asia’s dependence on US demand.
“Although there has been increasing intra-regional trade, a significant proportion is still intermediate goods which are eventually exported to industrialised countries,” Jimmy Koh, head of treasury research at Singapore's United Overseas Bank, said in the bank’s first quarter economic outlook. – Reuters