Another day of developments for economies important to Australia.
The Thai economy shrunk in the December quarter, while Singapore’s Prime Minister has warned that the country’s economy could contract by 5% or more over the remainder of 2009.
Thailand is following neighbors Singapore, Taiwan, Hong Kong and Japan and South Korea into or to the edge of recession.
Thailand’s economy contracted by a seasonally adjusted 6.1% in the fourth quarter – the worst performance in decades.
Fourth quarter GDP fell by 4.3 % from the 4th quarter of 2007.
And the Government’s planning agency warned that the economy was likely to shrink this year.
The planning agency’s forecast range for the full year 2009 was from zero growth down to a contraction of 1%, a big cut from its previous forecast of 3-4% growth in November. It said the economy grew by 2.6% in 2008 overall.
It was the first quarterly decline in four years, caused by a slump in exports and the political unrest late last year that toppled a government and hurt confidence.
It was much worse than the 4% slump forecast by market analysts and followed revised 0.4% growth in the third quarter (for an annual growth figure of 3.9%).
Singapore PM, Lee Hsien Loong was quoted by newsagencies as saying on radio that "It could be worse if the global economy worsens."
Singapore twice cut its growth forecasts in January, most recently after data showed the economy contracted in the fourth quarter by its largest amount since records began in 1976.
The government’s latest forecast sees the economy shrinking by between 2% and 5% this year, after growth of 1.2%.
In its 2009 budget last month the Government warned that the economic crisis will be drawn out.
And yesterday the Prime Minister repeated those thoughts: "Over the next four, five years – if you can get two, three per cent growth, I think that’s not bad. Three, four per cent growth, I would say we’re lucky," Lee said.
In Japan, SFCG, a lender to small business, collapsed owning $US3.6 billion, and became the biggest corporate crash in the country since the mild recession seven years ago.
Troubled Citigroup’s Japanese subsidiaries are creditors of the failed company.
And, the credit crunch and 70% fall in oil prices has stepped up pressure on the oil rich Persian Gulf with the effective bailout of Dubai and its race horse owning, property developing Al Maktoum family.
The Central Bank of the United Arab Emirates bought half of a five year $US20 billion bond program by Dubai.
Dubai will try and raise the rest locally over the next five years.
It will help Dubai meet massive debt repayments this year, and to continue to run a budget deficit to try and keep the stalled local economy out of a nasty recession that is looming.
That should ease the pressure on Dubai which was starting to be treated like Iceland, Ukraine, Latvia and Ireland as another global basket case heading towards possible default.
Local banks are hard pressed to lend, even to the Government, real estate prices have fallen by 25% in five months, according to some estimates, unemployment is soaring, expatriates are fleeing the place without paying debts (to stay and default results in jail); and some of the state’s major global businesses are struggling.
It follows a move by neighbouring Abu Dhabi to inject $US4.4 billion into five of its own banks.
The UAE set up a $US13.6 billion fund last September to boost liquidity. In October it’s joined the global rush to guarantee bank deposits and promised another $US19 billion for the banking system (Source, FT).
"This program will secure the necessary funding for Dubai to meet its financial obligations and continue its development program,” the Dubai government said yesterday.
As well, Kuwait has rescued one of its major banks and injected around $US5 billion into the banking system there to boost liquidity and providing guarantees for commercial and investment banking deposits and loans. .
The UAE is aiding Dubai and Abu Dhabi via its huge $US330 billion sovereign fund, the world’s largest. It has also bailed out two of Dubai’s biggest mortgage companies.
The UAE Government is based in Abu Dhabi
Dubai is oil and gas poor (others in the UAE are richer in hydrocarbons), but in the last six years it has charged headlong down the development road with huge property plays, such as made islands, the world’s tallest building, an airline in Emirates, and a determined chase for financial services and tourism.
According to reports from ratings agencies like Moody’s, Dubai borrowed $80 billion from around the world to finance this ambitious rush to modernise.
Moody’s said last week that Dubai could have to repay $US15 billion of that figure this year, hence its need for cash.
It has seen the development of the world’s third largest biggest ports operator in DP World, which controls the old P & O port business in Australia.
The Nakheel property development company is a shareholder with Mirvac in Australia and a partner in their bid for a rich Government property development on Sydney Harbour.
Nakheel has cut back on much of its real estate spending and development work, including the Trump Tower that was being built at a cost of $US650 million by a group that included Leighton)_
Nakheel is run by Chris O’Donnell, a former Sydney property company executive. There have been reports in the last week of corruption issues surrounding at least two Australian property executives in Dubai (Source ArabianBusiness.com)
The Al Maktoum family has extensive racing interests in the UK, I
