Rupee Plunge
Indian policy makers led by Prime Minister Manmohan Singh are battling to stem the rupee’s plunge, attract capital flows to bridge a record current account deficit and revive growth. The currency has weakened about 28 percent versus the dollar in the past two years, reviving memories of the early 1990s crisis, when the government received an International Monetary Fund loan as foreign reserves waned.
“It seems now the pain is going to be in the emerging markets,” said Nitin Mathur, an analyst in Mumbai at Espirito Santo Investment Bank who expects sectors with higher valuations such as consumer goods to suffer the biggest declines. “The problems in India are not temporary blips. The problems are much more serious which will take a lot of effort to get resolved.”
In Thailand, the economy entered recession last quarter for the first time since the global financial crisis. Toyota Motor Corp. said last month industrywide car sales in Thailand will fall 9.5 percent this year. The government cut its 2013 growth forecast yesterday as exports cooled and local demand weakened, with higher household debt restricting scope for monetary easing.
Thai Credit
Thailand’s private-sector credit as a share of gross domestic product has “increased significantly” in recent years raising concern about financial stability, Krystal Tan, an economist at Capital Economics Ltd. in Singapore, said in a Bloomberg Brief commentary.
Taiwan last week cut its 2013 growth and exports forecasts and said the global outlook for the second half is worse than in May. The island’s export orders unexpectedly rose for the first time in six months in July, the government said today.
“We are seeing a turning point,” said Freya Beamish, Hong Kong-based economist with Lombard Street Research, who says China’s competitiveness has been hurt by labor costs that are 30 percent too high. “China’s seeing flat to falling growth on our estimates so the region’s clouds are already here.”
Sentiment is also being subdued by the prospect of a decline in U.S. stimulus, money that often finds its way to export-based countries in payment for goods.
Seeking Clues