Fundamentals and Current Situation Supports ADB Statements

Jittery Asian markets continue to experience further turbulence as the fundamentals from the Pacific Rim give nothing other than gloom for investors and policy makers. The Asian Development Bank said that nations in the region may experience their worst growth rates since 1998 as the global recession and weakening overseas demand batters the exports sector.

As economies fall deeper in a recession, global trade remains threatened. Consumers are paring spending and businesses are cutting back on capital spending resulting in less manufacturing output on the backs of waning demand. Manufacturers all across the globe have been affected by the global credit crisis that has now officially become the worst financial crisis since the Great Depression pushing the World Trade Organization to predict a 9 percent fall in global trade this year.

Concerning growth, the ADB forecasts the region excluding Japan, to grow a mere 3.4 percent his year before hoping for a recovery the upcoming year to reach a 6 percent growth rate. Knowing that many of these nations rely on exports, with the possibility of contracting 10.3 percent during 2009 according to ADB as well, this was definitely going to negatively impact growth.

Regarding Japan, the economy continued to slide further in a recession as the fundamentals released today showed that more people were losing their jobs after the jobless rate had inched higher to 4.4 percent from a previous 4.1 percent in January, marking a three year high; alongside a fall in the jobs available to applicants ration which had plummeted to the worst level since 1974 after reaching 0.59 from 0.67.

As time passes by, consumers have less money to spend as wages fell 2.7 percent pushing households to pare spending for the twelfth consecutive month as spending from their part fell 3.5 percent. With less spending and a falling exporting sector, who knows where the world's second largest economy is heading?

To support the ADB expectations earlier, the Reserve Bank of Australia's Deputy Governor stepped up to say that Australia is on its way to contract for the first time in twenty years during 2009. Although not in a technical recession, many economists still argue the fact the economy had entered a recession during the first quarter and are only waiting for confirmation especially after growth during the fourth quarter showed a 0.5 percent contraction for the first time in eight years.

The stimulus package created by the government in the form of cash handouts and tax cuts and the reduction in the benchmark rates to reach a 45 year low have yet to help the economy show signs of recovery despite yesterday news regarding new home sales were quite positive. Expectations are still for further rate cuts to be witnessed with the closest on April 7 where forecasts are for a 25 basis point cut to take the overall benchmark down to 3.00 percent. Ironically, Deputy Governor Ric Battellino still said, "Australia will remain one of the better-performing economies in the developed world and well placed to benefit from the renewed global expansion when it comes."

Finally, in South Korea, industrial production dropped 10.3 percent during February in annual terms after exporters who were affected by the drastic slump continued to cut output production on beliefs that overseas demand will still take its time to recover. This is just additional information that has resulted in more facts piling up that the economy is on the verge of a recession. Hopes are now to see the stimulus packages to help revive growth in the economy when it slowed at the quickest pace in just over a decade.

Asian stocks regarded negatively to erase previous gains witnessed last week and throughout the entire month as economies were deepening and on speculation that the different measures taken by governments are not enough to stimulate growth. The benchmark MSCI Asia Pacific was down 1.1 percent at 2:46 p.m. in Tokyo to reach 81.18 percent whereas the S&P/ASX 200 index shed 22.30 points to close at 3582.10 points while the Nikkei index lost 1.54 percent to end the day at 8109.53 points.

Ecpulse

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