Economic Update (2Q 2009)
By Peter Switzer

In late April, as the sick US economy showed that it could be on the mend, Bloomberg news pointed out that eight of Asia’s 10 most-traded currencies, excluding the Japanese yen, gained ground against the US dollar.

This was a promising sign for Asian economies that the worst of the financial crisis had passed and that there was a light at the end of the economic recovery tunnel.

Helping the Asian economy has been the fall in the price of oil, which contributed to South Korea’s current-account surplus. It was at a record $6.65 billion in March.

This flies in the face of negative views on Asia from the International Monetary Fund. “The IMF expects Asian growth to fall sharply to 1.3% in 2009 from 5.1% in the previous year,” reported the International Business Times. “The region's growth is expected to rebound in 2010 at a rate of 4.3%.”

That said, it should be pointed out that the IMF’s predictive powers have not been accurate for some time. In February, the lender predicted 2.7% growth for 2009, but by April they had grown more negative.

The fund’s Regional Economic Outlook for Asia and Pacific says a global economic recovery was needed to improve Asia’s economic fortunes.
"The synchronized nature of the global downturn and Asia's strong reliance on external demand weigh against the prospects of a speedy turnaround of economic activity in the region," the report said.

The IMF downgraded its global economic forecast to negative 1.3% this year, against a January prediction from the lender of 0.5% growth.

The International Business Times says the IMF expects contracting GDP for Japan, Australia, New Zealand, Hong Kong, South Korea, Singapore, Taiwan, Malaysia and Thailand this year.

“The worst decline is forecast for the city-state economy of Singapore, which is expected to shrink 10% this year,” it warned.

On the other hand, China is forecast to grow 6.5% and India is expected to grow 4.5%.

Indonesia and Vietnam are also in positive territory at 2.5% and 3.3% respectively.
“Japan, the world’s second largest economy, is expected to suffer a severe recession this year, with a 6.2% fall in GDP,” the IMF said.

And critically it suggested that Japan would not have a sustained growth until late 2010.

For Australia and New Zealand, GDP contraction this year will turn to growth by late-2009.

The IMF also says the star performer, outside of China and India, will be South Korea, which is tipped to start growing, and with a bang, early in 2010.