Economic crisis sweeps deeper into Asia
Posted: 28 November 2008 1702 hrs

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TOKYO - Asian economic giants Japan and India on Friday revealed fresh damage from the global financial crisis, which has battered international trade and consumer spending.

Japan slipped deeper into recession with factory output tumbling 3.1 per cent and consumer spending dropping 3.8 per cent in October, official data showed.

The figures were "stunningly bad," said Societe Generale's chief Asia economist, Glenn Maguire.

"Japan's industrial activity is set to worsen in the near-term, perhaps by an unprecedented degree, as exports to the US have plunged over the past year," he warned.

Rising economic powerhouse India said its economic growth slowed to 7.6 per cent in the third quarter of 2008, from 7.9 per cent in the second.

While it was still a respectable performance at a time when many developed economies are in recession, the slowdown in India highlights the extent to which the US-born financial crisis has spread around the world.

There was also bad news from South Korea, where industrial production fell 2.3 per cent in October in a sign that the export-driven economy is slowing faster than expected.

Investors mostly managed to look beyond the gloomy news, hoping that interest rate cuts and stimulus spending would eventually turn things around.

Tokyo ended up 1.7 per cent in light trade after Thursday's Thanksgiving holiday in the United States, while Seoul rose 1.2 per cent and Sydney jumped 4.3 per cent. But Shanghai finished with a loss of 2.4 per cent as investors took profits after the previous day's strong gains.

The main Bombay Stock Exchange opened 1.4 per cent lower Friday, a day after being forced to shut down due to a coordinated attack by gunmen across the city, which left at least 130 people dead.

While some analysts believe stocks are now looking cheap, others see little prospect of a recovery in the current climate of fear and gloom over the global economy.

European markets got off to a lacklustre start. The London FTSE 100 rose 0.15 per cent at the open while the Paris CAC 40 slipped 0.29 per cent and the Frankfurt DAX was flat. The region continued to feel the fallout from the financial crisis.

Britain's Royal Bank of Scotland said the government would end up with a 57.9 per cent stake in the bank after a share issue to raise funds to help it cope with the financial crisis.

RBS said that ordinary shareholders had agreed to take up only 0.24 per cent of the share issue, with the government then taking up the balance, as provided for in its recapitalisation plan for the British banking system.

Last week, shareholders approved plans to raise 20 billion pounds (23.5 billion euros, 29.5 billion US dollars) in fresh capital as part of a state rescue deal for Britain's banking sector.

Sweden fell into recession in the third quarter after its economy contracted 0.1 per cent for two successive quarters, the national statistics agency (SCB) said on Friday.

Sweden's economy shrank by 0.1 per cent in the second and third quarters on a sequential basis, the SCB said, adding that it had revised downwards its second quarter figure which in August it had said was flat.

A survey showed consumer and business confidence in the European Union slumped in November to the lowest level in 23 years in the face of the looming recession.

General Motors' boss in Europe wrote to staff telling them that the troubled US automaker needed to cut European costs aggressively if it was to survive as vehicle markets slump.

In the once-booming steel industry, ArcelorMittal said it could slash up to 9,000 jobs across the group worldwide through voluntary redundancies.

British retail group Woolworths, which employs 25,000 people, said it was close to bankruptcy.

With developed nations focused on efforts to boost their own recession-ridden economies, the World Bank urged donors not to abandon poor countries hit by the financial crisis.

Developing countries "find themselves at the mercy of a crisis not of their making," World Bank President Robert Zoellick said ahead of a UN development conference this weekend.

"A retreat to protectionism or economic nationalism by developed countries will hurt them even further," he added.

- AFP/ir