Accessibility links

Asia Hit with More Bad Economic News

The global economic slowdown continues to take a toll on Asia. New data from China show growth is slowing, while the South Korean central bank has made an unprecedented interest rate cut. And things are not likely to improve next year.

China's government revenue slumped more than 3 percent in November - another sign of the weakening economy.

The Chinese Ministry of Finance said Thursday that tax cuts, intended to stimulate spending and slumping demand, caused the fall in tax revenue. It was the third straight monthly contraction.

The government also says last month's inflation rate sank to 2.4 percent, the lowest in nearly two years. Although consumers might welcome slower price increases, analysts say the decline indicates weakening demand for consumer goods and commodities.

In Seoul, the Bank of Korea slashed its benchmark seven-day repurchase rate by a record 1 percentage point, to 3 percent. The cut was the fourth in two months and puts the rate at a historic low.

Lee Seong-tae, the central bank's governor says the economy will slow down for some time, because exports are likely to lose steam as the global slump continues.

He says more cuts are possible, if this jolt to the financial system does not revive lending and demand.

Thursday, the Asian Development Bank cut its forecast for regional growth. It says Asia's developing economies are likely to average 6.9 percent growth, this year, and 5.8 percent, next year. The non-profit development lender earlier had expected growth of 7.5 percent this year and slightly more than 7 percent in 2009.

The ADB says the problem is the rapid contraction in the American and European markets - cutting demand for Asian exports.

Lee Jong-Wha is the head of the ADB's office of regional economic integration. He unveiled the new forecasts in Hong Kong and said, although most Asian economies will not fall as far as the developed markets, the region will not escape unscathed.

"Our projection is up to now based on the information, we made a judgment that Asian countries may not get pneumonia, but still will get a cold," Lee said. "This much is pretty sure. Winter is coming and we'll get a cold."

He says China and India, which have seen dramatic growth in the past decade, will see their economies slow. The ADB says China will expand by about 8.2 percent in 2009. That is down from 9.5 percent this year, and nearly 11 percent in 2007.

India's growth is forecast to slow to about 6.5 percent next year, well below the 9 percent expansion, last year.

Although those growth rates might draw envy from many countries in recession, Indian and Chinese leaders worry about being able to generate jobs for millions of unemployed workers.

Many governments, around the region, are looking for with new ways to kick start (invigorate) their economies. In Thailand, the government has declared January 2 will be a holiday, in addition to the traditional holidays of December 31 and January 1. Officials hope many Thais will use the long break to travel and shop, giving a boost to the tourism industry, which has been hit hard by both the global economic crisis and domestic political tensions.

Thursday's flurry of bad news pushed some Asian stock markets lower. Shanghai's main index was off more than 2 percent. But the benchmark indexes in Tokyo and Seoul managed to close up by about three-quarters of a point.