The eurozone’s worsening problems are affecting the export-dominated economies of East Asia hard. The 17-nation zone contracted in Q4, and it will probably shrink this quarter as well. “We expect a fall in GDP of about 1.0 per cent this year and an even sharper decline in 2013,” said Jennifer McKeown at Capital Economics. Unemployment is at a record high, retail sales are falling, and consumer and business confidence is headed in the wrong direction.Europe is not only suffering from growth-destroying regulation and cascading banking difficulties. On the energy front, many of Europe's governments are literally committing suicide.
The zone’s performance will continue to fail to meet consensus estimates because there is an unreal quality to expert predictions about Europe. The eurozone’s problems, despite the serial announcements of interim solutions, remain intractable. European leaders need growth, and they are not going to get it until they either fundamentally restructure their currency or implement some sort of fiscal union. And on top of that, they need to eliminate growth-destroying regulation. _Forbes
And there is always the problem of Europe's demographic collapse, which is magnifying Europe's debt crisis to intractable levels.
Put simply, Europe is no longer capable of holding up its end of the tacit global trade bargain.
There’s no mystery why Singapore’s economy, a regional bellwether, is in trouble. The country’s trade is about three times its gross domestic product, and the external outlook is not favorable. Prime Minster Lee, not surprisingly, blamed the deteriorating global environment in general and Europe in particular. “As a small, open country,” he noted in his message, “Singapore will inevitably be affected.”Europe's problems are largely of Europe's own making. But her problems do not stop at her own borders. They propagate outward, adversely impacting all the nations which depend upon trade with Europe. Long-term prospects for Europa -- given the twin curses of debt and demographic decline -- are not good, unless a miracle happens.
And so will tiny Hong Kong’s trading economy. Analysts are talking about 2% growth this year, down from a forecasted 5% for 2011. The slowdown has already started. Growth estimates for last quarter range from a relatively optimistic 3.3%, from HSBC, to a gloomy 1.5%, issued by JP Morgan.
It’s not only the small open economies that are having problems. India, which is certainly large and not considered especially trade-dependent, is also seeing the economy stumble. There, the retreat from reform is having a negative effect. Growth could drop below 6%, from 6.9% last quarter.
Japan may have actually contracted in Q4. The Tokyo-based Japan Center for Economic Research estimates that the economy shrank in both October and November, in large measure due to weak exports with Europe as the primary culprit. The weak fourth quarter is especially disheartening as it ends the recovery evident in Q3, when the economy soared 5.6% due to rebuilding from the March 11 earthquake-tsunami.
South Korea, a pillar of strength in East Asia, is also experiencing difficulties. The Bank of Korea, the central bank, is lowering forecasts for both this year and last. Nomura International sees South Korean growth slowing to 3% in 2012, due to softness in exports, off from an estimated 3.5% for 2011. If there is a risk to the Nomura estimates, it is to the downside.
The story is much the same in flood-ravaged Thailand, where there was a contraction in Q4 due to export problems; the steady Philippines, hurt by export prospects for the electronics sector; and impressive Vietnam, where analysts think that growth last year was off the 2010 pace. If you’re looking for exceptions to the downward trend, try Indonesia, where growth remained steady at 6.5% last quarter, and Malaysia, which was helped because exports held up last year. In Kuala Lumpur, however, the government is now worried about Europe. _Forbes