Export slowdown threatens emerging Asia's credit-fuelled boom
By Stuart Grudgings
KUALA LUMPUR (Reuters) - A deepening slump in exports is sending tremors through Asia, threatening to undermine some booming emerging economies that have surged ahead in recent years on a heady combination of easy credit, buoyant consumer demand and strong domestic investment.
Export growth throughout Asia has sagged in recent months, hit by slackening demand from the United States, Europe and China and by slumping commodity prices. Leading indicators are also pointing to weaker factory activity in the coming months.
The slowdown is being felt most keenly by Southeast Asian countries whose strong domestic economies are sucking in imports more rapidly and which now face sharp deteriorations in their trade balances that could spook investors.
Heavy stock market and currency falls in the region this week have underlined the risks as investors grow nervous that the U.S. Federal Reserve may taper its quantitative easing (QE) policy that has fuelled a surge of credit in Southeast Asia.
"For countries like Indonesia, and to a certain extent Malaysia, you've had this perfect storm of weak external demand, weak commodity prices, and strong domestic demand," said Robert Prior-Wandesforde, director of Asian Economic Research at Credit Suisse in Singapore.
"One doesn't want to see it go too far. We don't want these countries running into huge, unsustainable deficits because inevitably we'll run into Asian financial crisis type stories."
Malaysia's trade surplus fell to its lowest level in April since the 1997 crisis with a surprise 3.3 percent year-on-year fall in exports announced last week. The country could soon run its first trade deficit in 16 years.
Exports from the Philippines, which already runs a trade deficit and last month reported the fastest annual economic growth in Asia of 7.8 percent, plunged 12.8 percent in April from a year earlier. Indonesia reported a trade deficit in April after exports contracted for a 13th straight month. Thai exports have slowed, contributing to a record trade deficit in January. Continued...