Singapore economy shows some moderation
The Singapore economy grew at a pace of 4.4 percent y/y in the second quarter of 2022, after growth of 3.8 percent y/y in the first quarter of 2022. This follows a strong economic rebound from the pandemic in 2021, when GDP growth rose by 7.6 percent y/y.
Helped by improving domestic demand, Singapore’s services sector grew at 4.8 percent y/y and the manufacturing sector grew at a pace of 5.7 percent y/y in the second quarter of 2022. Service sector output in the second quarter was buoyed by surging output for food and beverage services, as pandemic-related restrictions were eased significantly during the quarter.
The headline S&P Global Singapore Purchasing Managers’ Index™ (PMI™) posted 56.0 in August, down from 58.0 in July. The latest reading remained above the 50.0 no-change mark for a twenty-first successive month to signal continued expansion in overall operating conditions. Despite staying historically high, the rate of improvement eased to a five-month low amid slight softening in both output and demand growth.
Singapore’s manufacturing output growth slowed to just 0.5 percent year-on-year in August, although production rose by 2.0 percent month-on-month.
A key factor driving the slowdown of manufacturing output growth has been weakening growth momentum in the electronics sector, which accounts for 40 percent of total manufacturing sector output. Electronics output in August contracted by 7.8 percent y/y, with semiconductors output down by 6.6 percent y/y. The downturn in electronics reflects a broader global weakening in electronics new orders, as economic growth momentum has slowed in the US, EU and China in recent months. Declining chemicals output, which fell by 11.2 percent y/y, also contributed to the weak outturn.
Declining output in electronics and chemicals was mitigated by strong growth in biomedical manufacturing, which rose by 11.1 percent y/y, as well as buoyant growth in transport engineering, which rose by 32.8 percent y/y. This reflected strong growth in both the aerospace engineering segment, which rose by 42.3 percent y/y, as well as 42.8 percent y/y growth in the marine and offshore engineering segment.
Overall, total manufacturing output growth during the first eight months of 2022 was up 4.4 percent y/y, with the electronics sector still recording positive growth of 4.9 percent y/y. However, the electronics sector will face growing headwinds in the near term due to continued weakening growth momentum expected for the US and EU in the remainder of 2022 and into 2023.
Liberal trade could boost Bangladesh’s GDP by 14.8pc
Unilateral trade and investment liberalisation could boost Bangladesh’s GDP, investment, and exports by 14.8 percent, 20 percent, and 63.2 percent, respectively, according to a World Bank study.
Such unilateral reforms will help Bangladesh reduce trade costs and access to cheaper and better-quality imported inputs to boost domestic firms’ competitiveness and output, it says, pointing out that Bangladesh’s trade competitiveness is eroding mainly due to lack of lower export base.
For greater market access for exports, Bangladesh needs to explore deeper and comprehensive trade integration within the region and beyond, suggests the report “Bangladesh- Country Economic Memorandum: Change of fabric,” which was disclosed on the bank’s website on Friday.
Its chapter 3 on “Boosting Bangladesh’s Trade Competitiveness” studies the potential gains for Bangladesh from regional and multinational integration as well as trade reforms.
China’s economy is losing its lustre
Although “nobody can replace” China in the near future, growing uncertainty coupled with competition from neighbouring countries is causing foreign companies to reassess operations in the world’s second largest economy, says the president of the American Chamber of Commerce in China.
“People do fundamentally think China is an important market to be in, but there are reservations,” Michael Hart said in an interview with the South China Morning Post.
“Markets like Vietnam have certainly become more interesting. People are reinforcing and modifying their supply chains. The moves are not necessarily anti-China measures, but definitely a way to protect themselves.”
Hart said foreign companies in China have entered a “quiet period” while they either wait for signals the country will reopen, or face reluctance from head offices about expanding.
Business confidence in China is at all time lows, with rising geopolitical tension threatening key industries and stringent Covid-19 measures battering the economy.
Google shuts down translate service in China
Alphabet’s Google on Monday said it shut down the Google Translate service in mainland China, citing low usage.
The move marks the end of one of its last remaining products in the world’s second-largest economy.
The dedicated mainland China website for Google Translate now redirects users to the Hong Kong version of the service. However, this is not accessible from mainland China.
“We are discontinuing Google Translate in mainland China due to low usage,” Google said in a statement.
Google has had a fraught relationship with the Chinese market. The U.S. technology giant pulled its search engine from China in 2010 because of strict government censorship online. Its other services — such as Google Maps and Gmail — are also effectively blocked by the Chinese government.
As a result, local competitors such as search engine Baidu and social media and gaming giant Tencent have come to dominate the Chinese internet landscape in areas from search to translation.
India’s economic prospects and role in the world economy
As part of the State of the Global Economy and Global Governance event series, the Global Economy and Development program at Brookings is featuring leading voices on global and regional economic outlook and fiscal policy.
On October 11, Brahima S. Coulibaly, vice president of the Global Economy and Development program, and Eswar Prasad, senior fellow at Brookings, will welcome Finance Minister Nirmala Sitharaman as India prepares to assume the G-20 presidency in December 2022. In a fireside chat, Eswar Prasad and Minister Sitharaman will discuss India’s current growth trajectory, economic challenges (especially employment growth) and reform, and fiscal policy as one of the largest economies in the world.
One year in, Japanese PM’s ‘new capitalism’ faces old complaints
When Japanese Prime Minister Fumio Kishida came to power in October last year, he pledged to foster a “new form of capitalism” that would spur healthy growth alongside a more equal distribution of wealth.
But as Kishida marks one year in office on Tuesday, the Japanese leader’s “new capitalism” is still struggling to get off the ground amid criticism that his signature strategy lacks concrete details or clear targets.
Kishida’s struggles to turn his vision into a coherent economic plan capable of reversing decades of stagnation come as the world’s third-largest economy faces mounting challenges at home and overseas, from rising inflation and a weakening yen to global supply chain snags and the war in Ukraine.
Kishida, a former banker who positioned himself as the only post-war prime minister with experience in the finance industry, is widely seen as an awkward fit for the populist rhetoric he has championed.
Indonesia is the best-performing Asia-Pacific market so far this year
Indonesia’s Jakarta Composite index may have faced a couple of bumps in the road in 2022, but as of Monday’s close, it was the best-performing major Asia-Pacific index for the year.
The index is up 6.51 percent since the start of the year.
In contrast, the Hang Seng index in Hong Kong, South Korea’s Kospi, and Taiwan’s Taiex have plunged more than 25 percent this year.
Mainland China’s Shanghai Composite and Shenzhen Component have also been hammered, slumping by nearly 17 percent and 27 percent respectively.
The Nikkei 225 in Japan, India’s Nifty 50 and the SET index in Thailand fared better — notching single digit losses.
Singapore’s Straits Times index was the second-best performer in the region, falling just 0.53 percent.
Malaysia gears for election-friendly budget with smaller deficit
As Malaysia’s Prime Minister Ismail Sabri Yaakob prepares his re-election bid, his administration’s final budget on Friday offers him a rare opportunity to win over voters with spending proposals that many expect will be heavy on feel-good factor and light on new taxes.
Ismail, who is under pressure from his United Malays National Organisation party to call elections before the year is out, needs to get the budget math right before the vote. For that, he must reconcile the goal of narrowing the fiscal deficit to keep investors’ faith in the economy with the need for shielding the masses from high inflation, while ensuring economic growth remains sustainable.
Zafrul: Malaysia’s economy now different from times of 1997-98 Asian financial crisis
The current state of Malaysia’s economy is “very different” from the times of the 1997-98 Asian Financial Crisis (AFC), according to Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz.
The minister said that Malaysia’s economic fundamentals and financial systems are now “much different”, following various economic and financial reforms implemented after the AFC.
He said this includes a more diversified domestic economic structure, supported by a well-capitalised financial system and a strong external position.
As a comparison, Tengku Zafrul said the country’s economy contracted by 5.5 percent at the peak of the Covid-19 crisis, while it contracted by 7.4 percent during the AFC.
“The country’s financial market is now very open with high foreign investor participation, and we have a current account surplus, fuelled by diversified exports,” Tengku Zafrul said at the Dewan Rakyat on Tuesday (Oct 4).
“So far this year, the current account remains positive, with a total of RM3 billion in the first quarter, and RM4.4 billion in the second quarter.”
He later added that the country’s financial system and the stock market had continued to function well and in an orderly manner.
Sri Lanka’s IMF saga
The ongoing economic crisis in Sri Lanka is one of the worst that the world has seen in recent times. The island nation has an unprecedented inflation rate reaching as high as 69.8 percent in September 2022.
Sri Lanka has been facing a host of macroeconomic issues, which eventually snowballed into a humanitarian disaster in early 2022. Several mismanaged political moves – such as the election-induced tax cuts in 2019 or the sudden switch to organic farming in 2021 – combined with the repeated use of external credit to mitigate Balance of Payments (BOP) crises and the COVID-induced downfall of the tourism sector combined to result in today’s massive crisis. The long lines at fuel stations across the country, civil protests ousting first the sitting prime minister and then the president, and the unavailability of necessary commodities like medicines and milk powder give a mere glimpse into the tremendous economic mess the country has run into.
Against this background, while countries such as India, Bangladesh, Japan and China have provided financial assistance and other aid to Sri Lanka in the last few months, the island nation was able to reach a preliminary agreement with the IMF for a 48-month Extended Fund Facility (EEF) of $2.9 billion. The IMF loan is intended to restore macroeconomic stability and debt sustainability, to unlock the growth potential in the economy. While safeguarding Sri Lanka’s financial stability and stepping up the structural reforms that are crucial to address corruption issues in the country, the IMF facility also aims to aid the poor and vulnerable, who are disproportionately affected by the pandemic and the ensuing economic crisis.