Thailand: GDP shrinks 9% amid floods in fourth quarter, almost twice estimates
Thailand’s economy shrank more than economists estimated as the worst floods in almost 70 years disrupted output by manufacturers from Western Digital Corp. to Honda Motor Co., putting pressure on policy makers to aid growth. Gross domestic product declined 9% in the three months through December from a year earlier, after climbing a revised 3.7% the previous quarter, the National Economic and Social Development Board said in Bangkok yesterday. The median of 14 estimates in a Bloomberg News survey was for a 5% drop. The economy grew 0.1% in 2011. (Bloomberg)
Thailand’s Board of Investment (BOI) revealed that foreign direct investment in Jan increased by 60% yoy to stand at THB25bn, with the four most popular industries being metal, machinery and transportation; electronic and electrical appliances; chemical, paper and plastics; and infrastructure. (Thai Financial Post)
Thailand’s Commerce Ministry will press on with its rice-pledging scheme despite warnings on the severe export competition and the huge stockpiles it will have to handle, as it believes the strategy will drive up domestic and international prices. (The Nation)
Thailand’s National Economic and Social Development Board raised its 2012 growth forecast to 5.5-6.5% from the previous 4.5-5.5%, in line with Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong’s firm belief that the economy would expand by as much as 7% this year. NESDB also expects inflation to increase by 3.5-4% from 3.8% last year, due to high food and oil prices. (The Nation)
Japan: Trade deficit widens to record as exports slump
Japan posted a record trade deficit in January as the yen’s strength and weaker global demand eroded manufacturers’ profits and slowed the nation’s recovery from last year’s earthquake and tsunami. The gap widened to JPY1.48trn (USD19bn) and shipments dropped 9.3% from a year earlier as energy imports surged, a Ministry of Finance reported in Tokyo yesterday. The median estimate of 28 economists surveyed by Bloomberg News was for a shortfall of JPY1.46trn. The drag from trade risks countering the boost from reconstruction work that will drive a return to growth this quarter after the economy shrank in the final three months of last year. (Bloomberg)
Japan: S&P affirms Japan’s AA- credit rating with negative outlook
Standard and Poor’s affirmed Japan’s sovereign-debt rating at AA- while maintaining a negative outlook and warning that a downgrade is likely if medium-term growth prospects weaken. The ranking is supported by an “ample net external asset position, relatively strong financial system, and diversified economy,” S&P said in a statement yesterday, also citing the yen’s role as a “key international reserve currency.” S&P has cut the ratings of European nations including France and Italy this year, along with reducing both the U.S. and Japan last year. (Bloomberg)
Japan’s revised leading economic indicator rose 0.3% mom to stand at 94.0 in Dec (93.7 in Nov), according to the Cabinet Office. (Bloomberg)
Chinese senior leaders agreed to continue proactive fiscal policies and prudent monetary policies in 2012, in a statement issued after a meeting held Monday to discuss a draft report submitted by the central government to China's top legislature's annual session scheduled for next month. (Xinhua)
China's central bank and financial institutions bought a net Rmb140.9bn (US$22.4bn) of foreign exchange in Jan compared with net sales of Rmb100.3bn in Dec. (WSJ)
The Bank of Korea named a new member of its policy board, marking the beginning of an overhaul of its rate-setting committee that will see four members of the seven-person policy board replaced in a scheduled overhaul. The central bank will retain its governor, Kim Choong-soo. (WSJ)
By restructuring and privatising, Vietnam will cut the number of state-owned enterprises to 692 after 2015, and to 217 by 2020, from 1,309 now, the government-run enterprise renovation department said. (Reuters)
Singapore firms continued to expand strongly overseas, especially into emerging markets, according to International Enterprise Singapore. Local companies directly invested S$31.7bn overseas in 2011, a 9.7% increase over 2010. (ST)
EU: Greece nears second aid package as default risk spooks Europe
European governments moved toward a second rescue of Greece, calculating that the EUR130bn (USD172bn) cost of a fresh bailout is a price worth paying to prevent a default that could shatter the euro area. Finance ministers haggled into the night in Brussels over the terms of new loans to Greece and a possible contribution by central banks. They also bartered with bank representatives over a bond exchange meant to stave off the immediate threat of a Greek bankruptcy next month. (Bloomberg)
Top European banks, responding to new regulations and wary of lending, are stashing increasingly large sums of money at central banks around the world in a collective flight to safety. The eight giant European banks that have disclosed their annual results in recent weeks reported holding a total of about US$816bn in cash and deposits at central banks as of 31 Dec. That is up 50% yoy from US$543bn. (WSJ)
Eurozone chiefs fought to close a deal for a new Athens bailout as Greek Prime Minister Lucas Papademos sought improved terms on a key write-down of Greece's debt in a last-minute meeting with banks. All sides expressed confidence that an agreement would be found to greenlight a €230bn financial lifeline, in exchange for strict surveillance of the Athens government over coming years. "Papademos has now gone in" to talks with creditor banks, one eurozone governmental source told AFP at around 1930 GMT. (AFP)
Greece is "no threat to the world economy," European Central Bank executive board member Joerg Asmussen said. "Nevertheless, other countries expect us to find a solution. But by the G20 meeting at the end of the week, we'll be a great deal further" towards one, he said with confidence. (AFP)
US Treasury Secretary Timothy Geithner said the US would encourage the International Monetary Fund to support an agreement on Greek economic reforms that had been agreed to by Greek leaders. "This is a very strong and very difficult package of reforms, deserving of support of the international community and the IMF," Geithner said. "The United States will encourage the IMF to support this agreement." (Reuters)
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Singapore: Government increases aid to poor, boosts wages of older workers
Singapore said it will increase aid to its poorest citizens and boost wages of older workers as the government seeks to defray rising living costs and reduce dependency on foreign labour. The government will cut the proportion of overseas workers that companies can hire and may consider increasing levies of foreign workers further, Finance Minister Tharman Shanmugaratnam said in his budget speech in Parliament. Employers will be partly reimbursed for hiring older workers, and low-income and elderly households will receive cash and rebates yearly to limit the impact of the goods and services tax. (Bloomberg)
China: Government cuts bank reserve ratios a second time as exports tumble
China cut the amount of cash that banks must set aside as reserves for the second time in three months to spur lending as Europe’s debt crisis curbs exports and the housing market cools. Reserve ratios will fall 50 bpts, effective 24 Feb, the People’s Bank of China said on its website. The level for the nation’s largest lenders will decline to 20.5%, based on previous statements. China follows Japan in expanding monetary easing even as global equity markets are buoyed by signs of strength in the US economy and optimism that Europe’s fiscal crisis will be contained. (Bloomberg)
Japan: Japan’s Finance Minister says Japan and China will help Europe solve crisis via IMF
Japanese Finance Minister Jun Azumi said his nation and China will work together to help Europe solve its debt crisis through the International Monetary Fund. Europe needs a bigger so-called firewall of added funding to contain the crisis, even as Greece shows some improvement in solving its financial woes, Azumi told reporters in Beijing after meeting Chinese Vice Premier Wang Qishan. Azumi also said he asked China to make its currency more flexible. The IMF proposed last month to boost its lending funds by as much as USD500bn to insulate the global economy against any deterioration of Europe’s sovereign crisis. (Bloomberg)
UK: Cameron faces Labour call for UK tax stimulus in March budget
UK Prime Minister David Cameron faced opposition calls to cut sales tax and abandon his health service revamp as scrutiny of the coalition government’s deficit-cutting policy intensified before next month’s budget. The attack on Cameron’s deficit strategy comes a day before he meets doctors to rebuild momentum in a program to streamline health spending, which former Labour Health Secretary John Reid called on him to scrap. That gathering coincides with an end to Parliament’s recess as focus shifts toward the contents of Chancellor of the Exchequer George Osborne’s March 21 budget.(Bloomberg)
EU: EU Ministers circle In on Greek rescue as crisis disputes linger
European officials attempting to fend off the euro area’s first sovereign default will try to settle remaining disputes today as they close in on a EUR130bn (USD170bn) Greek bailout. Finance ministers meet in Brussels at 3:30pm, joining Greece’s prime minister, Lucas Papademos, who arrived on the eve of the gathering. Their talks on his country’s second bailout in two years will aim to reconcile demands made on Greek leaders, a debt swap among private creditors, the role of the European Central Bank and concerns the measures won’t bear fruit. (Bloomberg)
EU: Greece identifies USD427m in budget cuts for bailout
Prime Minister Lucas Papademos said Greece found all the extra cuts needed to lower spending by EUR325m (USD427m million) to secure a bailout aimed at averting the region’s first sovereign default. The government identified “a series of additional measures amounting to EUR125m in order to complete the package of budget cuts worth EUR325m according to an e-mailed transcript. Finance ministers from all 17 euro-area countries meet in Brussels tomorrow as governments close in on a deal to unlock a 130 billion-euro aid package for Greece, the second such international bailout of the country in two years. (Bloomberg)
US: Obama’s re-election chances rise with improving economy
The economy is looking better to the American public and with it President Barack Obama’s re-election prospects. Claims for jobless benefits unexpectedly dropped last week to the lowest level in almost four years, providing fresh evidence the job market is on the mend. The Bloomberg Consumer Comfort Index climbed for a fourth straight week to reach the highest level in a year. Sentiment is rising even among those who have yet to benefit from the recovery, as payrolls expand and the unemployment rate drops. Jobless Americans are the most optimistic since April 2008. (Bloomberg)
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