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02 March 2024

Export-dependent economies take big hits


Worldwide recession has hit export dependent econ-omies, particularly electronics producers, hard and they are now finding that domestic demand cannot possibly make up for the decline in overseas sales.

In Taiwan, a leading semiconductor maker, exports fell 44 per cent in January while GDP contracted by 8.4 per cent in the last quarter of 2008 – the kinds of declines that cannot be compensated for by domestic demand.

"This is the very fear of export-dependent economies such as Taiwan," said Lucas Lee, an analyst on the island with brokerage firm Mega Securities. "Few can be sure whether or when global demand will pick up."

Even in Asia's smaller economies, the drop in exports has had a powerful impact. Thai exports suffered their biggest decline in January in a decade.

Malaysia, which is heavily dependent on exports – in particular electronics, accounting for about 40 percent of overseas sales – has also been hit hard.

"The impact is now global and Malaysia is no exception," Malaysian Trade Minister Muhyiddin Yassin said last week. He said the government was looking at a "worst-case scenario" of exports falling as much as three to four per cent this year.

"This is a very unhealthy economic growth pattern that developed in the last more than 10 years," said Chen Xingdong, an economist with BNP Paribas bank in China.

"Asia's economies all are quite heavily dependent on exports," he said. "They must turn to domestic demand."

Analysts say that is easier said than done.

In places such as Japan, where manufacturers cut production by a record 10 per cent in January and exports plunged more than 45 per cent, the health of the economy at home is still inextricably linked to overseas markets.

"It is hardly possible for Japan to boost domestic demand now and pull the economy up," said Hideyuki Araki, an economist at the Resona Research Institute in Osaka. "After all, corporate spending on plants and equipment is linked to exports," she said. "Japan needs to wait for a recovery in foreign demand."

Across much of Asia the story has been the same.

Hong Kong exports are down almost 22 per cent. Singapore's exports fell 35 per cent in January – the biggest drop since the government began keeping year-on-year records more than 30 years ago.

In South Korea, where they account for more than one-third of GDP, exports are down 34 per cent.

"Even China is counting on demand from the US and Europe to restore growth," she said in a recent report. "All eyes will remain focused on when the US will recover."

Chan, of Moody's Economy.com, said Indonesia and the Philippines looked to be two of the region's bright spots for the year ahead – and that both would be resisting external drags on their economies from "solid" domestic demand.