Asian Economies not Showing the Resilience of China and Taiwan

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Macroeconomics

China is of course the talk of the town when it comes to growth this year (indeed almost any year this decade) but China is not Asia and the other economies in the region have been displaying varying signs of growth and/or contraction suggesting that they are not performing consistently to the aftermath of the financial crisis.

Taiwan, ranked 10th in the Asia-Pacific region (based on GDP according to Wikipedia) is reported in an FT article as posting a significant jump in GDP in the third quarter. Powered by exports the economy expanded by 8.3% on a quarter by quarter annualized basis. In fact Taiwan has been doing exceptionally well this year possibly because its economy is now so closely aligned with China’s. Moreover, and as if it needed it, the government announced last week a $124bn stimulus to the economy mostly in the form of infrastructure projects.

Indonesia did surprisingly well too; the economy grew by an annual rate of 4.2% probably buoyed in part by commodity exports.

Singapore and the Philippines, ranked 17 and 18th respectively also showed growth but it was anemic compared to Taiwan and below market expectations. Singapore expanded by 3.6% year on year in October, following a 6.3% decline the month before showing the fragile nature of the country’s export orientated economy. The Philippines grew by just 1% in the third quarter, again below market expectations, if thankfully still in positive territory. Hong Kong ranked 15th grew by just 0.4% in the third quarter down from a 3.5% growth in the quarter before. Finally, Malaysia continued to contract, by 1.2% in the third quarter but better than the 3.9% fall the quarter before.

Illustrating how venerable some of these Asian economies are to perceptions of not just the economy but political stability, Thailand has urged investors to not be spooked by political risks, the underlying institutions are stable said the Finance Minister in the FT article. The economy is also managing the downturn reasonably well; growing by 1.3% quarter on quarter retaining Thailand’s position as 12th ranked Asian economy.

Some of the smaller economies are visibly struggling though. Vietnam, ranked 24th has increased its base interest rate by 100 basis points to 8% in an attempt to retain foreign capital while simultaneously devaluing the currency, the Vietnamese Dong, by 5% against the US Dollar in an effort to support exporters. So far Vietnam is the first country to directly devalue in this way; others have encouraged adjustments by talking of fiscal controls or just complained loudly as their currency has become progressively less competitive against the dollar and the yuan. But in the current weak export markets and with so many Asian economies relying on overseas markets it could be only a matter of time before others do the same.

–Stuart Burns

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