Asia's Rebound Expanding

Last week it was China confirming solid growth in the third quarter, the week before it was Singapore pointing out that its economy was seeing the same positive forces.

Australia has avoided the crunch, Japan is on the up, and earnings reports later this week will give more shape to that suggestion.

Malaysia has cut taxes as its economy resurfaces, and yesterday the South Korean economy was shown to have expanded in the third quarter at the fastest rate in seven years, thanks to exports and increased investment (helped by government tax breaks and stimulus spending).

The country’s central bank, the Bank of Korea, said the economy grew 2.9% from the second quarter, when it grew by 2.6%.

The economy grew 0.1% in the first quarter of 2009 thanks to heavy Government spending.

That was after a deep 5.1% plunge in the final three months of 2008.

That was the fastest pace since the first quarter of 2002 and compared with estimates from the market of growth of just under 2%.

From a year earlier, GDP was up 0.6%, which was also the growth rate in the June year for the Australian economy. That was the first quarter of year on year growth this year.

The country’s stockmarket is up 46% (Australia is up close to 60% and the China by 68%) and the won has risen 5.5% against the US dollar in the past three months as it has become clear the economy has escaped a savage mauling from the recession, unlike Japan.

The unemployment rate fell in September to a nine-month low of 3.4%, consumer and business sentiment have risen and the current account has returned to surplus after a deficit last year for the first time since 1997 (and the last big crisis to hit the country).

Exports grew 5.1% in the third quarter from the previous three months, when they were up 14.7% from the very depressed March quarter.

The fall in exports is slowing, like in Japan and China.

Corporate investment in factories and equipment climbed 9%, compared with a 10.1% rise in the second quarter, thanks to government investment help through its stimulus packages.

Private consumption rose 1.4% from the second quarter; government spending fell 0.8% and construction investment dropped 2.1%.

Australia’s Reserve Bank has started lifting interest rates and there are now reports that the Bank of Korea is thinking of following at its next meeting on November 12.

Late last week Malaysia announced income tax cuts for a second straight year in its 2010 budget.

The top personal tax rate will be reduced to 26% in 2010 from 27%.

The country is expected to expand 2% to 3% next year after shrinking by an estimated 3% this year.

“Private sector activity is anticipated to pick up following signs of recovery, enabling the government to consolidate its fiscal position for greater policy flexibility in times of crisis,” the Ministry of Finance said in its 2009/2010 economic report.

“Emphasis will be on creating a conducive environment for businesses and entrepreneurship to thrive in a more liberalized environment.”

Malaysia will review rules that may be barriers to investment and plans to attract foreign investors to take up stakes in local companies, the finance ministry said.

State-owned companies will be privatized, procedures for registering a business will be expedited and tax relief will be provided for a national broadband project.

Tax incentives for Islamic finance products will be extended until 2015 and more funds will be allocated to promote tourism.

The budget deficit is expected to narrow to 5.6% of gross domestic product next year from a two decade high of 7.4% this year. It was 2.4% of GDP in 2008.

Spending in 2010 is expected to be 191.5 billion ringgit ($US56 billion), down 11.2% from 2009’s outlays.

The government says it aims to balance the budget in the next three to six years and the 2011 shortfall will be lower than the one projected for 2010.