14
business news
Japan in recession, IMF
needs more money
LONDON/TOKYO: Japan became the latest
major economy to fall into recession yester-
day with France close behind, and the IMF
said it needed at least US$100 billion (RM360
billion) to fight the billowing economic crisis
enveloping the world.
The US Senate, meanwhile, was to begin
debating a bailout for the battered US auto
industry later in the day. Germany was to hold
talks with General Motors unit Opel.
In something of a surprise, Japan slid into
its first recession in seven years in the third
quarter as the financial crisis curbed demand
for Japanese exports.
The 0.1% contraction in the world’s sec-
ond-largest economy in July-September was
worse than consensus forecasts.
The euro zone is also in formal recession,
with two consecutive quarters of contraction,
Britain and the United States are on the brink
and China is slowing sharply.
Britain’s main employers group forecast
yesterday that unemployment could rise to
almost three million by 2010 while France’s
central bank said that the French economy
should contract 0.5% in the fourth quarter.
Policymakers have little doubt that their
economies have not finished declining.
“We need to bear in mind that (our) eco-
nomic conditions could worsen further as
the US and European financial crisis deepens,
worries of economic downturn heighten and
stock and foreign exchange markets make big
swings,” Japanese Economy Minister Kaoru
Yosano told a news conference.
International Monetary Fund (IMF) manag-
ing director Dominique Strauss-Kahn told the
BBC his organisation was likely to need at
least US$100 billion in extra funding over the
next six months in order to help countries out
of the mire.
Financial markets continued to shudder
under the joint strain of declining economies
and ructions in the financial system.
Oil fell more than US$1 to below US$56
(RM201.60) a barrel and MSCI’s main world
stock index was down half a per cent for a
46% year-to-date loss.
Leaders of the world’s 20 largest econo-
mies, meeting in Washington over the week-
theSun | TUESDAY NOVEMBER 18 2008
KLCI Points
end, agreed on a host of steps to rescue the
global economy.
But they left it to individual governments
to tailor their response to their own circum-
stances and troubled industries.
The post-meeting statement from the
group of major industrialised and developing
countries contained a laundry list of reform
pledges aimed at soothing volatile markets
and calming consumers’ worries.
“This weekend’s G20 summit failed to
deliver any new stimulus measures to rescue
the world economy from the current reces-
sion, but at least it avoided the knee-jerk
responses (such as rushed regulation) that
would have made things worse,” Julian Jessop
at London-based Capital Economics said in
a report.
“The real purpose of this summit was to
agree on a work programme for reform of the
global financial system. In that respect we
would suggest that it has been a success.”
The G20 statement said that all financial
markets, products and participants would
be subject to supervision, vowed tougher
accounting rules, a review of compensation
practices and greater cooperation between
national regulators.
Finance ministers were told to develop
specific plans with the first set of actions to be
completed by the end of March, and a follow-
up meeting held by the end of April.
Separately, the IMF said on Saturday that it
had agreed with Pakistan on a US$7.6 billion
(RM27.36 billion) emergency loan to stave off
a balance of payments crisis and pave the
way for a broader economic rescue plan.
On Sunday, Iceland said it had reached a
deal with several European Union states on
how to repay thousands of foreign savers with
money in frozen Icelandic accounts, poten-
tially paving the way for an IMF-led package
worth as much as US$6 billion (RM21.6 billion)
for the crisis-hit country.
With a US$700 billion (RM2.52 trillion) fund
promised to stabilise the battered US financial
No full blown
system, the outgoing Bush administration and
its successor was set to tackle the urgent crisis in Asia,
question of how, or whether, to rescue the
nation’s “big three” auto makers. – Reuters says ADB
NEW DELHI: Regardless of the global eco-
nomic shivers, the Asian financial markets
are in a better position to weather the on-
slaught of the ongoing financial crisis, says
a senior banker.
The Manila-based Asian Development
Bank (ADB) managing director-general Rajat
M. Nag said Asia is in a better position than
developed nations to face the current eco-
nomic challenges.
“Developing Asia shows healthy growth.
India or Asian market is not going to suffer
financial crisis because they are resilient,
the capitalisation of banks is good and non-
performing loans are low.
“Also the institutional arrangements and
the prudential regulation arrangements are
much better than 10 years ago during the
last economic crisis.
“Overall, I am optimistic about Asia’s finan-
cial sector as a whole,” Rajat told Bernama on
the sidelines of the India Economic Forum, an
edition of the World Economic Forum.
The ADB forecasts Asia will enjoy a 7.8%
growth this year while next year it is likely
to drop under 6%.
“There won’t be a full blown crisis in Asia
because fundamentals are much better and
Asia is not exposed to the toxic of the prime
rate crisis,” he said.
He, however, warned Asian govern-
ments not to panic and remain focused on
pro-growth policies to overcome financial
pressures on their economies.
“Countries must recognise long-term
infrastructure investments, like in health and
education, rather than panicking,” he said.
Rajat reminded that about 600 million
people in Asia still live on less than US$1 a
day, making them the most vulnerable group
during any economic downturn.
“It is good to recognise the poor. They suf-
fered when fuel prices increased, when food
prices increased and now the financial crisis.
Don’t forget the other face of Asia,” he said.