Japan loses its spot
Japan’s economy has dropped to the fourth largest in the world. It fell behind Germany after its economy shrank in the last quarter of 2023.
The Japanese government reported Thursday the economy shrank at an annual rate of 0.4 percent in October to December.
It shrunk 2.9 percent from July to September. Two straight quarters of shrinkage are considered a sign that an economy is in a recession.
Real gross domestic product is a measure of the value of a nation’s products and services. The yearly rate measures what would have happened if the quarterly rate lasted a year.
Japan’s economy was the second largest until 2010, when it was overtaken by China’s. It had been the third-largest economy until it fell behind Germany.
Japan’s nominal GDP totaled $4.2 trillion last year. Germany’s was between $4.4 and $4.5 trillion.
Real GDP takes into account inflation, while nominal GDP does not.
A weaker Japanese yen was a major reason for the drop to fourth place. But economists say the drop is also due to a decline in its population and slowing productivity and competitiveness.
In the past, Japan was described as a “an economic miracle.” After much of the country was destroyed in World War II, it became the second-largest economy after the United States. It continued to see strong growth in the 1970s and 1980s. But in the last 30 years, the economy has grown only moderately at times.
Both the Japanese and German economies are powered by strong small- and medium-size businesses with strong productivity.
Youth appetite for gold rises as Chinese economy loses lustre
The Sound of gentle tapping filled a jewellery workshop in southern China as a craftsman hammered pine leaf patterns onto a soft slab of gold in the style of old ink paintings.
Elaborate traditional pieces created by master goldsmiths have always been popular in China, bought as gifts for special occasions like the Lunar New Year or simply as investments.
But jewellers are now having to consider a new and fast-growing consumer base – younger people, who are increasingly keen to buy gold, seeing it as a safe investment in uncertain economic times.
Key to gold’s current popularity is China’s lacklustre post-Covid recovery, which is hitting young people especially hard as youth unemployment soars and traditional investment options such as property suffer, analysts say.
India’s economy surges further ahead in Feb
The Indian economy, which expanded at a four-month high in January, continued to strengthen in February, seeing accelerations in both manufacturing and services sectors during the month.
While services sector output climbed to a seven-month high in February, manufacturing sector output reached a five-month high, firming India’s position as one of the fastest-growing major economies.
The HSBC Flash India Composite Purchasing Managers’ Index (PMI), compiled by S&P Global, climbed to 61.5 in February from a revised reading of 61.2 for January—well above the 50-point threshold that differentiates expansion from contraction.
The Seasonally adjusted index measures month-on-month change in the combined output of India’s manufacturing and service sectors.
“Growth improved in both the manufacturing (five-month high) and services (seven-month high) economies, with survey participants attributing the upturn to buoyant demand conditions, investment in technology, efficiency gains, expanded clientele and favourable sales developments,” HSBC said in a report released on Thursday.
Malaysia’s central bank sees ‘positive’ economy in 2024
Malaysia’s central bank has defended the trajectory of the country’s economic growth, after the ringgit sunk to its lowest since the 1997 Asian financial crisis, blaming a strengthening US dollar and uncertainty in China’s economy rather than domestic indicators for the slump.
The Ringgit fell to 4.7965 against the dollar in midafternoon trade on Tuesday, its lowest since an all-time low of 4.885 in January 1998, according to Bloomberg data.
Bank Negara Malaysia (BNM) on the same day said the ringgit’s performance was in line with other regional currencies that took a hit from expectations of lower US interest rates, the gathering clouds over China’s economic prospects and other geopolitical concerns.
“BNM is of the view that the current level of the ringgit does not reflect the positive prospects of the Malaysian economy going forward,” the central bank said in a statement.
The Ringgit has persistently been one of the region’s weakest currencies exiting the Covid-19 pandemic, ranked only second to the Japanese yen as Asia’s worst performing currency last year.
The Weak ringgit is good news for exporters in Malaysia’s trade-reliant economy, but has led to stubbornly high inflation as consumers grappled with rising prices of imports such as fertilisers and animal feed, with costs then passed along the supply chain.
The Rohingya crisis and Bangladesh’s economic downturn
In August 2017, a deadly ethnic clearance operation, backed by the Myanmar military against the minority Rohingya (Muslim) population in Rakhine state, began the displacement of thousands of Rohingyas. By the end of 2017, around 745,000 people had fled to Cox’s Bazar, a district in southeast Bangladesh.
Bangladesh, though not a signatory to the 1951 refugee convention, and despite being a country with a high population density, sheltered and welcomed these forcibly displaced Myanmar nationals on an ad hoc basis. By April 2019, more than 900,000 Rohingyas were living in coastal Bangladesh, and presently about 90 percent of the Rohingya population lives in Bangladesh.
With limited financial resources, Bangladesh, in collaboration with donor and global aid bodies, has worked hard to provide shelter, food and medical care for Rohingya people. But Bangladesh is a least-developed country with a large population and few resources, and cannot handle this influx alone.
The Rohingyas’ statelessness often causes their basic human rights to be denied. Food insecurity leads to malnutrition; anaemia, diphtheria, cholera and scabies are rife; they suffer physically and mentally. In 2022, 40 percent of pregnant and lactating Rohingya women were anaemic. They lack sanitation, quality housing and basic needs. Human trafficking of women and children, polygamy, and forced prostitution are all common in the Rohingya populations, and 56 percent of physical violence perpetrated in their camps is by intimate partners.
Indonesia and OECD to start accession discussions
The Organisation for Economic Co-operation and Development announced Tuesday that it will open accession talks with Indonesia. If it joins, Indonesia will be the first OECD member from Southeast Asia.
“As the largest economy in Southeast Asia and the world’s third-largest democracy, Indonesia is a significant global player, providing important leadership across its region and beyond,” OECD Secretary-General Mathias Cormann said in a statement.
The OECD has 38 members, including countries in Europe, North America and Oceania. Among Asian nations, Japan and South Korea are members. Indonesia became an OECD Key Partner in 2007 and in 2014 helped launch the organization’s Southeast Asia program.
It may take time for Indonesia to join, as there is no deadline for completion of the accession process, the OECD said. A draft accession road map will be prepared for the consideration of the OECD Council at its next meeting.
“Today’s decision by OECD members is historic,” Cormann said, adding, “Indonesia’s application is the first from Southeast Asia, one of the most dynamic growth regions of the world.”
Nepal should leverage powerful friends and chart
Nepal’s coalition government, led by Prime Minister Pushpa Kamal Dahal, is stable but the country is experiencing economic woes prompting public discontent, with growing influence from foreign players like India, China and the United States. The government needs to address domestic issues like corruption and the economy, minimise the exodus of Nepali youth due to the poor job market and maintain economically beneficial relationships with its global partners while adhering to principles of non-alignment.
Inflation under control in vietnam
Despite impending challenges, Vietnam is expected to maintain inflation below the National Assembly’s target this year, experts say.
Dr. Nguyen Duc Do of the Institute of Economics and Finance predicted manageable inflation in 2024 due to slow growth in major economies like the US and China.
Amid a forecast of sluggish global economic growth, exports from Vietnam are projected to grow modestly.
Even if the GDP growth reaches 6 percent as planned for 2024 or the average of 4.64 percent recorded from 2020-2024, the economy is unlikely to operate at full capacity, helping keep inflation in check at around 3 percent – 3.5 percent, below the National Assembly’s target of 4 percent – 4.5 percent.
Dr. Do emphasised the effectiveness of State Bank of Vietnam’s anti-inflation policies over the past decade in mitigating inflationary pressures. However, maintaining this control requires close monitoring of the global economic landscape, especially major economies.
Dr. Do suggested prioritising the balance of supply and demand in the market to stabilise domestic prices.
Dr. Vu Dinh Anh, another prominent economist, noted Vietnam’s success in keeping the average consumer price index (CPI) at 3.25 percent by the end of 2023 while adding even excluding fuel and food, core inflation would still be above 4 percent.
Dr. Anh warned of potential inflationary risks stemming from public investment disbursement and credit expansion in the coming year.
To sustain control over inflation in 2024, economic experts recommend vigilant monitoring of monetary inflation factors and timely responses from the government, ministries, sectors, and localities.
India, Sri Lanka take trade pact talks ahead
India and Sri Lanka are set to take the ongoing discussions on the Economic and Trade Cooperation Agreement (ETCA) forward, with the next two rounds of bilateral talks scheduled later this month and in March.
The Progress in negotiations is significant for New Delhi and Colombo, as the much-discussed pact was stalled in the past, owing to stiff opposition from some worker unions and hardline Sinhala-nationalist politicians, who saw the agreement as favouring Indian interests predominantly. At least 11 rounds of discussions were held between 2016 and 2019, when the Maithripala Sirisena-Ranil Wickremesinghe administration was in power, but the two signs failed to reach an agreement amid protests in Sri Lanka.
President Ranil Wickremesinghe, who assumed charge as President in 2022 in extraordinary circumstances during the island’s economic crisis when a mass uprising that ousted his predecessor Gotabaya Rajapaksa, has emphasised the need for trade pacts to aid the country’s economic recovery. Earlier this month, Sri Lanka inked a free trade pact with Thailand. India, followed by China, are the other two key partners that Mr. Wickremesinghe is keen to have upgraded agreements with, even as Sri Lankans reel under the painful aftermath of a financial meltdown.