Asia's economic woes deepen as Obama vows to beat crisis
Hong Kong (AFP) Feb 25, 2009
Japan on Wednesday posted a record trade deficit and Hong Kong said its economy would shrink by up to three percent in 2009 as recession woes deepened across Asia.
US President Barack Obama meanwhile unveiled plans to help pull the world's biggest economy out of recession, but admitted the government would have to spend even more to save the country's troubled banks and ailing auto companies.
Japan's recession woes showed no signs of abating as the finance ministry announced the trade deficit had ballooned in January to 952.6 billion yen (9.9 billion dollars) -- the worst month since records began 30 years ago.
Exports plummeted 45.7 percent from a year earlier, highlighting how Asia's largest economy has been left exposed during the slowdown due to its heavy reliance on foreign demand for its cars, high-tech products and other goods.
"Because of the shrinking global economy, Japan's business model of being dependent on exports is not working at all," said Barclays Capital chief Japan economist Kyohei Morita.
Japan's top automakers Toyota, Honda and Nissan -- which have already been forced to cut thousands of jobs -- said Wednesday they had also sharply reduced production in January to counter the slump in global car sales.
Toyota Motor, the world number one, said its global output had fallen 42.6 percent in January from a year earlier. Nissan Motor reported a 54.0 percent plunge while Honda logged a 33.5 percent drop.
Japan, the world's second largest economy after the United States, is now in its worst recession in decades, after contracting at an annualised pace of 12.7 percent in the last quarter of 2008 -- the worst figure in almost 35 years.
Its recovery from recession in the 1990s was thanks in large part to the strength of its exports, but falling global consumer spending and a strong yen have left exporters struggling to compete.
The news was no better from Hong Kong, where the city's financial secretary said the economy would shrink by two to three percent in 2009 -- the first annual contraction since the Asian financial crisis more than a decade ago.
"This once-in-a-century financial turmoil has spread from the financial markets to the real economy, leading to a synchronised global recession," John Tsang told lawmakers.
"Being a small, open economy, Hong Kong will inevitably be hit by the turmoil."
The southern Chinese city first tumbled into recession in the third quarter of 2008, and the situation worsened in the final quarter, with GDP shrinking 2.5 percent year-on-year, Tsang said.
Hong Kong is still sitting on 488 billion dollars (63 billion US) in fiscal reserves, which many analysts had expected Tsang to use to stimulate the economy, but he resisted, instead focusing on job creation and salary tax cuts.
The job situation in Singapore looked increasingly bleak, with a study by local bank DBS showing that up to 99,000 jobs could be lost in the city-state before the crisis is over due to decreased demand for exports.
Taiwan, which is also dependent on foreign demand for its goods, saw exports plunge 41.67 percent to 17.68 billion US dollars in January, the biggest fall since 1984. Industrial output fell a record 43.11 percent in January from a year earlier, the government said Tuesday.
And in Indonesia, Southeast Asia's largest economy, parliament approved a six-billion-US-dollar stimulus package of tax incentives, government spending and subsidies to stave off further fallout from the global crisis.
In Washington, President Obama tried to reassure Americans that the economy would survive the recession, saying that further spending on top of the trillions of dollars already set aside might be needed to bail out US banks.
The banks fell victim to mass defaults on so-called subprime mortgage loans -- made to people with weaker credit histories that were repackaged and sold to banks and investors around the world.
The defaults set off a global chain reaction that left banks saddled with piles of toxic assets leaving growth at a standstill, with many consumers unable to borrow money.
Obama announced a new lending fund aimed at small business owners and students, saying that without a plan to kickstart lending, "our recovery will be choked off before it even begins."
"You see, the flow of credit is the lifeblood of our economy," he told lawmakers.
Obama's speech cheered investors in Japan, where share prices closed up 2.65 percent. Hong Kong stocks were up 0.7 percent after the morning session.
earlier related report
In his debut address to a joint session of Congress, Obama demanded national sacrifice and responsibility in a calculated show of confidence, meant to steady a shaken nation and revive its moribund economy.
"Tonight, I want every American to know this: We will rebuild, we will recover, and the United States of America will emerge stronger than before," Obama said, after sparking riotous cheers from lawmakers.
In a blizzard of proposals, programs and reforms, the president demanded an overhaul of financial regulation and warned he may need more than the 700 billion dollars already earmarked to save the debt-riddled finance industry.
He announced the formation of a government lending plan to thaw frozen credit markets and fund auto and home purchases.
He called on Congress to immediately overhaul healthcare and to send him a bill forming a cap-and-trade system to combat global warming.
Turning to a global stage, Obama, declared a new era of US diplomatic engagement had begun, told lawmakers to fund an expansion in US armed forces and promised "swift and certain justice" for captured terrorists.
Making history as the first black president to address Congress, Obama warned the price for recovery would be a new economy in which people spent within their means, and ditched a chase for easy wealth and quick profits.
In a sharp critique of former president George W. Bush, and even his Democratic predecessor Bill Clinton, Obama warned Americans had for too long been prizing short term materialism over over long-term security.
"We failed to look beyond the next payment, the next quarter, or the next election," Obama said.
"All the while, critical debates and difficult decisions were put off for some other time on some other day -- well that day of reckoning has arrived, and the time to take charge of our future is here."
Obama promised that he would lead the fight for savings, saying his aides had been combing the federal budget in line with his vow to halve the deficit, forecast to reach 1.3 trillion dollars this year, by 2013.
"We have already identified two trillion dollars in savings over the next decade," Obama said.
"In this budget, we will end education programs that don't work and end direct payments to large agribusinesses that don't need them," Obama said.
"We'll eliminate the no-bid contracts that have wasted billions in Iraq, and reform our defense budget so that we're not paying for Cold War-era weapons systems we don't use."
The joint address to Congress, similar to a State of the Union speech, which presidents traditionally give in subsequent years of their administration, was also Obama's first chance for a formal roll-out of nuts-and-bolts policy.
He vowed to make long-term investments in "new jobs, new industries, and a renewed ability to compete with the rest of the world."
"The only way this century will be another American century is if we confront at last the price of our dependence on oil and the high cost of health care, the schools that aren't preparing our children and the mountain of debt they stand to inherit.
"That is our responsibility."
Shredding Bush administration reluctance to tackle climate change, Obama called on Congress to fund a chase for "clean, renewable energy."
"So I ask this Congress to send me legislation that places a market-based cap on carbon pollution and drives the production of more renewable energy in America."
At the same time, he said America could not ditch its iconic automobile industry.
"We are committed to the goal of a re-tooled, re-imagined auto industry that can compete and win,"
"Millions of jobs depend on it. Scores of communities depend on it. And I believe the nation that invented the automobile cannot walk away from it."
In his short time in power, Obama has already driven a 787-billion-dollar stimulus plan through Congress, unveiled a 275-billion-dollar home foreclosure prevention plan and tried, so far unsuccessfully, to steady the banking industry.
Rising Republican star Bobby Jindal, the Indian-American governor of Louisiana and a possible future presidential candidate, will deliver the Republican response to Obama's speech.
In excerpts released by the Republican National Committee, Jindal took sharp issue with the president's recovery program, branding it "irresponsible."
"Democratic leaders say their legislation will grow the economy," he said.
"What it will do is grow the government, increase our taxes down the line, and saddle future generations with debt.
earlier related report
"The world economic situation is austere and complicated, the global financial crisis had yet to level out and China's economic growth is under pressure of a slow-down," Hu said, according to a report by Xinhua news agency.
In a speech to the ruling Communist Party's 25-member Politburo, Hu called for "more powerful and efficient measures to increase domestic demand, and consumer demand in particular," the report said late Tuesday.
"The government should maintain the policy of giving top priority to increasing domestic demand while stabilising external demand," he was quoted saying.
The report gave no details on any specific policy proposals.
The party has signalled recently it intends to take measures during the National People's Congress session, beginning on March 5, to cushion the blow from the slowest economic growth in nearly 20 years.
China's growth slowed to 6.8 percent in the final quarter of last year, sharply down from the double-digit expansion seen for most of the past decade.
The global financial crisis has particularly hit the nation's vital manufacturing and export sectors, leaving at least 20 million migrant workers jobless and raising government concerns of social unrest.
Hu's sombre outlook was the latest of several forecasts from China's leadership, which in November unveiled a spending package worth four trillion yuan (580 billion dollars) by the end of 2010 to combat the crisis.
Premier Wen Jiabao said this month China must take "extraordinary measures" to boost the economy beyond that package.
On Monday, the Politburo vowed to introduce a slew of measures to respond to an economic slowdown that it said would make 2009 the most difficult year in nearly a decade.
They would include increased government investment, new plans to revive industries, and an enhanced social security umbrella for China's masses, it said in a press release.
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