Posted on: Monday, October 15, 2001

The September 11 attack | America strikes back
Economies of Asia feel ripple of attacks

Bloomberg News Service

Singapore — The toll that last month's attacks on the United States are exacting on Asia became clearer with Singapore facing its worst recession since 1964 and Thai exports posting their biggest drop in five years last month.

Japan said its economic outlook has worsened and any recovery in exports will be delayed. Australian consumer confidence tumbled to a five-month low in September. Singapore said its economy shrank at a 9.9 percent annual pace in the third quarter and would fall 3 percent for the year, the worst contraction since it gained independence.

From Japan to Hong Kong to Taiwan, Asian countries were already on the brink of recession after shrinking in the second quarter. With the attacks on New York and Washington prompting consumers in Asia's biggest export market to cut back, more pain may be in store.

"The rest of the region will follow suit and will report very bad third-quarter numbers in coming weeks," said Paul Schymyck, an economist at IDEAglobal. "There was a hope before the attacks that it was getting close to the bottom. That hope is now gone."

The attacks in New York and Washington will lower U.S. economic growth this year to 1.3 percent, the International Monetary Fund said last month. The U.S. economy grew at its slowest pace in eight years in the second quarter.

In Japan's first full assessment of the economic impact of the attacks last week, the government said the economy's performance has dropped. A slump in exports will add to woes that include record unemployment, declining factory production and falling consumer spending.

"With Japan's exports already dented significantly, we have to say the timing of a recovery has been pushed back further," said Haruhito Arai, an official in the Cabinet Office. "Now, our biggest concern is spending in the U.S. (which buys about 40 percent of Japan's exports)."

"The attacks first dampen U.S. consumer confidence, then their spending. That starts to hit Japanese exports," said Koji Shimamoto, chief strategist at BNP Paribas Securities Japan Ltd. "The attacks will harm the Japanese economy," and the effects will continue to be felt into next year, he said.

Thai exports fell as much as 18 percent last month from a year earlier to about $5 billion as air cargo to the United States was disrupted. Falling exports will cut economic growth to as little as 1.5 percent from last year's 4.4 percent expansion, the government said.

Taiwan said last week that exports fell a record 43 percent last month from a year earlier.

In Australia, consumer confidence was shaken by the attacks and the collapse of the country's No. 2 airline, Ansett Holdings Ltd., which put 16,000 people out of work, according to Westpac Banking Corp./Melbourne Institute's sentiment index.

The 9 percent slide in Westpac's consumer confidence index came a day after a report showed business confidence had its biggest drop on record last month. National Australia Bank Ltd.'s confidence index fell to its lowest since 1992.

Singapore's jobless rate rose to a two-year high of 3.8 percent in September from 2.6 percent in June, and the number of layoffs in the city of 4 million is expected to double to more than 20,000 this year.

That's posing a challenge to the government of Prime Minister Goh Chok Tong, which must hold elections by August. The government said it would announce measures Friday to soften the effects of a recession that's expected to extend into the middle of next year.

"Our emphasis would be on support measures to help individuals who are affected," said George Yeo, the minister of trade and industry.

Exports of semiconductors, disk drives and other goods, which powered Singapore's 9.9 percent growth last year, are collapsing. Shipments fell a record 30 percent from a year earlier in August, the sixth monthly drop. As orders fell, exporters have idled production lines and shed workers.

Maxtor Corp., the biggest maker of disk drives, said in June it would fire 700 workers in Singapore.