HONG KONG – A slew of gloomy economic reports from Asian nations show that Europe’s debt crisis and the broader global downturn are taking a growing toll on the region even as governments respond with extra spending and lower lending rates.
Hong Kong and Singapore, both Asian financial centers that are highly exposed to global trade, reported weak second quarter GDP Friday, the same day that figures from China showed its trade slowing more sharply than forecast in July.
China, the world’s second-biggest economy, said its export growth slumped to 1 percent in July from the previous month’s 11.3 percent in a sign of global economic weakness. Growth in imports sank to 4.7 percent from 6.3 percent in June, indicating that domestic demand also remains weak.
Other reports this month from economies including India, South Korea and Taiwan underlined the challenges that the export-reliant region is facing.
“Given this backdrop, the 1 percent from China merely reconfirmed that the severe headwind from the eurozone crisis and the U.S. slowdown is blowing harder,” Societe Generale economist Yao Wei said in a report.
Analysts expect China and other countries to step up efforts to fend off the downturn. China has cut interest rates twice since June and boosted infrastructure spending. Barclay’s Capital said another rate cut is imminent after Friday’s gloomy trade figures.
South Korea held interest rates steady this week after a surprise cut last month. But it warned that Europe’s debt crisis will result in the South Korean economy, which is one of Asia’s wealthiest, underperforming for a sustained period. That led central bank watchers to predict another rate cut soon.
Among other economic developments this week:
• India’s industrial output fell a worse-than-expected 1.8 percent in June as manufacturing and investment slump.
• Singapore’s economy shrank 0.7 percent in the April-June quarter from the previous quarter on weak global demand.
• Growth in China’s factory production weakened in July to 9.2 percent, its lowest since May 2009. Retail and auto sales also slowed.
• Taiwan’s exports dived 11.6 percent in July from a year earlier.
Hong Kong’s economy grew a “tepid” 1.1 percent in the second quarter as the simmering European debt crisis cut demand for exports, the government said. It lowered its full-year growth forecast to 1-2 percent from 1-3 percent and warned of continuing risks in the global economy.
Hong Kong exports declined 0.4 percent, with the European Union the weakest market. Shipments to Europe fell at a double-digit rate. Sluggish demand in developed countries for finished products such as electronics, furniture and clothing resulted in a lower appetite for raw materials from Asian manufacturers, the government said. That meant lower shipments passing through Hong Kong’s busy port, which handles a big share of goods from China.
“The external environment turned abruptly for the worse” over the quarter, Hong Kong government economist Helen Chan said in a statement. “Downside risks in the global economy continued to loom large.”