When times were booming, Asia’s factories would sometimes struggle to keep pace with the global demand for cars, semiconductors and electronics goods.
But as the worldwide recession has taken hold, the region’s export-dependent economies have been hit especially hard — and they are now finding that domestic demand cannot possibly make up for the decline in sales overseas.
“This is a very unhealthy economic growth pattern that developed in the last more than 10 years,” said Chen Xingdong (陳興動), an economist with BNP Paribas bank in China.
“Asia’s economies all are quite heavily dependent on exports,” Chen said. “They must turn to domestic demand.”
Analysts say that is easier said than done.
In places like Japan, where manufacturers cut production by a record 10 percent in January and exports plunged more than 45 percent, the health of the economy at home is still inextricably linked to overseas markets.
“It is hardly possible for Japan to boost domestic demand now and pull the economy up,” said Hideyuki Araki, an economist at the Resona Research Institute in Osaka.
“After all, corporate spending on plants and equipment is linked to exports,” Araki said. “Japan needs to wait for a recovery in foreign demand.”
Across much of Asia the story has been the same.
Hong Kong exports are down almost 22 percent. In South Korea, where they account for more than one-third of GDP, exports are down 34 percent.
“South Korea is now suffering from a double whammy — sluggish domestic demand and sinking overseas demand,” said analyst Yu Byoung-Gyu of the Hyundai Research Institute in Seoul.
As the global crisis started to take hold, some suggested Asian economies might be able to “de-couple” from the West and be able to keep going strong even while the US and others started to suffer.
“The de-coupling theory has been disproved,” said Sherman Chan (陳穎嘉), an analyst with Moody’s Economy.com.
“Even China is counting on demand from the US and Europe to restore growth,” she said in a recent report. “All eyes will remain focused on when the US will recover.”
In Taiwan, a leading semiconductor maker, exports fell 44 percent in January while GDP contracted by 8.4 percent in the last quarter of last year — the kinds of steep declines that cannot be compensated for by domestic demand.
“This is the very fear of export-dependent economies like Taiwan,” said Lucas Lee (李志安), a Mega Securities Co (兆豐證券) analyst. “Few can be sure whether or when global demand will pick up.”
Even in Asia’s smaller economies, the drop in exports has had a powerful impact. Malaysia, which is heavily dependent on exports — in particular electronics, accounting for about 40 percent of overseas sales — has also been hit hard.
“The impact is now global and Malaysia is no exception,” Malaysian Trade Minister Muhyiddin Yassin said last week.
He said the government was looking at a “worst-case scenario” of exports falling as much as 3 percent to 4 percent this year.
Chan said Indonesia and the Philippines looked to be two of the region’s bright spots for the year ahead — and that both would be resisting external drags on their economies from “solid” domestic demand.
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