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Asian Economy: Overview, Growth & Development

Are bad days in Indian economy over?

There is suddenly buzz around Indian economy, once again. A survey has shown that monthly manufacturing activity for January has suddenly shot up to an eight-year high in India.

This is remarkable in the sense that it definitely conveys that their is strong demand surge at the factory gates. This means consumption, which had been lying laggard, has spiked in India. Continued low consumption was being held responsible for longish economic slowdown in India.

Now, the Nikkei India Manufacturing Purchasing Managers’ Index (PMI), prepared by IHS Markit, rose from 52.7 in December 2019 to 55.3 in January 2020.

PMI is a key to understand manufacturing activity. A PMI in excess of 50 indicates expansion in manufacturing activity. The surprise improvement has been attributed to spike in demand.

The main pull force is consumer goods segment. But the real good news could be in expansion in capital goods segment indicating that investments in Indian economy might just have revived.

This comes on the back of the Economic Survey and Union Budget presented last week. Both projected a rather higher than expected GDP growth rate for 2020-21 at 6-6.5 percent. Experts called the projection too optimistic and ambitious.

India Ratings (Ind-Ra), the arm of ratings agency Fitch, actually downgraded corporate credit rating for Indian companies. This came after Union Finance Minister Nirmala Sitharaman presented her Union Budget 2020. The ratings agency predicted a growth rate of 5.6 percent for 2020-21. Its projection for 2019-20 is 4.6 against government’s 5 percent.

Global shares rally after China pledges tariff cuts on US goods

China has announced it will halve tariffs on some US imports as it moves to implement a “phase one” trade deal with the Trump administration and cushion the economic fallout from the coronavirus epidemic.

The move spurred a rally on global stock markets with Asian bourses rallying from deep losses on mounting concerns over the impact on China from the virus. European shares also gained ground while US futures trading was indicating a firmer start to Wall Street.

The finance ministry said tariffs on some goods would be cut by half, from 5 percent to 2.5 percent or 10 percent to 5 percent, on February 14, the same day that last month’s agreement between the two countries is set to take effect. The reductions apply to punitive tariffs imposed on 1,717 US products by China in September.

Washington also plans to halve tariffs on some Chinese goods on February 14 from 15 percent to 7.5 percent, according to a notice to the Federal Register by the office of the US Trade Representative. The US tariffs were imposed in September as President Donald Trump threatened to impose punitive taxes on all Chinese imports.

“China will adjust its measures at the same time to alleviate economic and trade frictions and expand economic and trade co-operation,” said a Chinese finance ministry spokesperson.

The spokesperson added that timely implementation of the agreement would “boost market confidence, promote bilateral relations [with the US] and help global economic growth”.

According to the agreement, China will increase imports from the US by $200bn over two years compared with 2017 levels.

Many economists considered this goal to be ambitious even before the coronavirus struck last month.

This week Larry Kudlow, Mr Trump’s top economic adviser, acknowledged that the purchases could be delayed because of the outbreak.

China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks closed 1.9 percent higher on Thursday, while Tokyo’s Topix finished the day up 2.1 percent. The Hang Seng had its best day since September, rising 2.6 percent.

European shares hit a new record high, as the Stoxx 600 climbed 0.6 percent in early trading. The index, which tracks the region’s largest 600 companies, has risen 3.7 percent this week and is on course for its best weekly performance since late 2016.

Japan’s economy seen sustaining moderate expansion

The Bank of Japan (BOJ) stands ready to ramp up stimulus if the economy’s recovery is derailed, Deputy Governor Masazumi Wakatabe said on Wednesday, warning that the coronavirus outbreak could hurt corporate sentiment and global trade.

Wakatabe said that the central bank had no immediate plans to conduct a fresh review of its monetary policy framework.

The BOJ must be mindful that European and US central banks are undertaking policy reviews to scrutinise whether their inflation targets and tools are sufficient, Wakatabe said.

“But there are no plans now for the BOJ to conduct a policy review, like one being conducted by the Federal Reserve and the European Central Bank,” he told a news conference.

Bank of Japan Deputy Governor said Japan’s economy is likely to have emerged from a sharp but temporary slowdown late last year helped by robust domestic demand and easing Sino-US trade tensions, signalling that no immediate monetary easing was on the horizon.

But he said risks remain high, including growing uncertainty on how the spread of the coronavirus could affect China – the engine of world’s growth – and the global economy.

“China’s presence in the global economy has become very large,” which means the BOJ must pay “maximum attention” to how the virus could affect Japan via supply chain disruptions and falling inbound tourism, Wakatabe told a news conference after meeting with business leaders in Matsuyama, western Japan.

“The BOJ won’t hesitate to take additional easing steps if risks become very large and increase the chance that the momentum toward achieving its 2 percent price target will be lost,” said Wakatabe, who is seen as an advocate of aggressive easing.

Wakatabe said the BOJ would not rule out any policy option if it were to ease, including deepening negative interest rates.

“The reason why we maintain negative interest rates is that their benefit exceeds the cost. I don’t think negative rates are hurting consumer sentiment,” he said.

Under a policy dubbed yield curve control, the BOJ guides short-term interest rates at -0.1 percent and the 10-year government bond yield around 0 percent as part of efforts to hit its price goal.

Indonesia economic growth slips to 5.02pc in 2019

Indonesia’s economy grew more slowly than expected last year, official data showed on Wednesday, and officials warned the country´s lucrative tourism sector faced a negative impact from a drop in Chinese tourists owing to the deadly coronavirus.

Southeast Asia´s biggest economy expanded 5.02 percent, down from the 5.17 percent the previous year, owing to weakness in exports and softer manufacturing output.

The figures also missed forecasts for a 5.3 percent expansion. In December, the World Bank warned that forest fires which raged across Indonesia last year hit the economy to the tune of some $5.2 billion.

The country was also grappling with slumping prices for key commodities such as coal and palm oil, as well as the effects of a China-US trade war which has roiled economies around the world.

“Sustaining growth in a 5.0 percent range in the current environment isn’t easy,” statistics agency head Suhariyanto, who goes by one name, told reporters in Jakarta. “So I think achieving 5.02 percent during a global economic slowdown is quite good.”


Tourism officials have warned of a drop-off this year as Indonesia throws up barriers to Chinese visitors over fears of a coronavirus outbreak in the country. Some two million Chinese tourists visit Indonesian annually.

“The number of Chinese visitors has dropped significantly since the imposition of travel restrictions,” Ngurah Wijaya, an adviser to Bali Tourism Board and Bali Promotion Board, earlier told.

“And we have no clarity as well on how soon they can or will return.” Research house Oxford Economics also said the drop-off would take the steam off growth in the first half of 2020.

“We expect the economy to be weak in Q1 as exports take a hit due to the coronavirus outbreak and tourism slows,” it said Wednesday. Indonesia´s central bank cut interest rates several times in 2019 to counter slowing growth, throwing up a challenge to President Joko Widodo who has pledged to use his second term to energise the economy by cutting red tape and an embarking on an infrastructure blitz.

Wuhan virus outbreak strikes hard Vietnam’s economy

In a gloomy forecast in the first regular cabinet meeting of the year, the Ministry of Industry and Trade (MoIT) said it expected that exports to China in the first quarter could drop by 5-8 percent compared to the same period last year.

Such an estimate would involve the ongoing novel coronavirus epidemic being put under control in less than three months since it began in late January.

The death toll from the novel coronavirus 2019-nCov that originated in the Chinese city of Wuhan climbed to 492 as of Wednesday, with 24,536 people infected, mostly in mainland China. The virus has rapidly spread to 25 countries, including Vietnam which reported 10 infections, prompting the country to declare a public health emergency.

Export volume to China would plummet for various reasons including a decrease in the country’s demand for imported goods, restricted border and Chinese domestic trade and lengthened customs clearance time caused by strict quarantine measures from both countries, the MoIT explained.

According to the ministry, it was not possible for Vietnam to avoid economic consequences caused by the outbreak as the country shared a border with China and had extensive links in trade, investment and tourism.

“For the last two weeks, the outbreak has quickly made direct impacts on Vietnam’s economy in trade, tourism, transport, the stock market and production,” reported the MoIT.

Thai tourism and economy take a big hit

This is supposed to be the top tourist season in Thailand, with beaches and major tourist attractions packed with visitors, especially those from China who make up the largest single group of foreign tourists to the kingdom, South-east Asia’s second-largest economy.

But many such places are now half-empty or almost empty after China decided to suspend tours abroad on Jan 27 in the light of the worsening coronavirus outbreak. Up to 492 people have been killed by the virus which originated in the central Chinese city of Wuhan. Almost all the deaths have occurred in China.

“I’m about to lose my job. We have to wrap up this season now. The Chinese tours are done,” said Haranyawat Saengprasit, a manager and guide at a speedboat tour company in the southern province of Phang Nga which caters exclusively to Chinese tourists.

“There are other things I can do though. I might open a food stall or a second-hand clothes shop. But it’s the people working under me that I’m worried about,” said the 39-year-old whose company is expected to shut its operations in the province in a few days, leaving some 40 workers jobless.

The tourism season in Thailand typically ends in May and resumes in October.

Many other tourist operators are also shutting down in the wake of the virus outbreak.

For All Star Cruise, a cruise company in Pattaya, a beach town two hours’ drive from Bangkok, the indefinite closure since Feb 1 was as much about the lack of customers as health concerns.

“If we set sail at this rate, we will be running at a loss. It’s just not worth it,” said Ms Suthasinee Srimala, an executive in charge of selling All Star tickets. More than two-thirds or 70 percent of 300 tickets are bought each day by Chinese tourists.

“More importantly, we’re concerned about our staff’s exposure to the virus. Better be safe than sorry,” she added.

Singapore says currency has room to weaken as virus hits economy

Singapore’s central bank said on Wednesday that its currency has room to weaken as an outbreak of coronavirus hits its economy but added that its current policy stance remains appropriate.

The surprise statement by the Monetary Authority of Singapore (MAS) sent the Singapore dollar SGD= to its lowest levels since October, making it the day’s worst performing currency in Asia even as Thailand unexpectedly cut rates.

The Singapore dollar was down around 0.8 percent against the U.S. dollar, its biggest daily fall in about two years SGD=.

Singapore has warned that the epidemic will hit growth, just as its economy was showing signs of recovering from last year’s weakest growth in a decade.

The city-state has reported 24 cases of new coronavirus, while the death toll from coronavirus in China neared 500 on Wednesday.

Issuing a statement in response to media queries, MAS said its closely-guarded currency gauge, called NEER, had been trading at the top of its policy band, and therefore, has room to depreciate to accommodate any economic hit.

“There is sufficient room within the policy band to accommodate an easing…in line with the weakening of economic conditions as a result of the outbreak of the 2019 novel coronavirus in China and other countries, including Singapore,” MAS said.

The central bank added it was monitoring economic developments closely but that its policy stance remained unchanged and its next policy review would be in April as scheduled.

“The message is clear,” said ANZ’s head of Asia research Khoon Goh.

“MAS is comfortable, and indeed seemingly welcomes, a weaker exchange rate in light of the economic impact” from the coronavirus outbreak.

MAS manages policy through exchange rate settings, rather than through interest rates as other central banks do, letting the Singapore dollar rise or fall against the currencies of its main trading partners within an undisclosed policy band.

The central bank eased policy at the last of its semiannual meetings in October for the first time in three years, and before the latest statement some traders had suspected it could move again.

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