Since November last year, the US economy has been sliding down a steep slope. The IMF recently estimated that the US economy will only grow 1.7 percent in 2001. This is yet another downward adjustment from last year's estimate of 3.2 percent and the latest estimate from the US Federal Reserve of 2 to 2.5 percent. Correspondingly, estimates for the growth rate of the world economy in 2001 fell from an original 4.2 to 3.4 percent.
With the US economy on the slide, the new treasury secretary, Paul O'Neill, made a point of saying on his way to a meeting in Italy that the whole world can no longer rely on the US to act as the locomotive, and other countries must provide for themselves. Of course his words are bitter, but they are particularly meaningful for Asia. Asian exports are overly dependent on the US -- 20 percent of Singapore's GDP comes from exports to the US; Malaysia, 27 percent; the Philippines, 16 percent.
The problem is especially acute for electronic products, which constitute 27 percent of Asia's exports. A slowdown of 20 percent in the export growth rate will be reflected in a downward adjustment in the growth rate of the entire region's economy by 1.1 percent. By the end of last year, the scope of growth in US orders for IT products reached a low of only 5.4 percent in December. This was down 17.2 percent from November and down almost 30 percent from the peak in June. Similarly, growth in shipments for December was only 7.9 percent, down 12.2 percent from November and down 35.8 percent from the peak in November 1999.
When the US sneezes, Asia catches a cold. The influence on Asia's electronics industry has already led to a decrease in exports from throughout the region. Growth has slipped, bringing about local economic and financial problems in each country of the region. Naturally, Japan, which had hoped to break out of its decline by expanding exports to the US, can only remain in decline and continue to degenerate further.
At present, the US economy is just beginning to slide. At what point it will find support and hit bottom is still a matter about which everyone tells a different story, and the belief that it will revive in the latter half of the year is only one version among many. The tax cut proposal raised recently is also currently the subject of heated debate. Supposing the tax cuts are implemented, whether they will stimulate prosperity or worsen the financial situation remains unknown. From December to January, the num-bers of newly dismissed employees in the US increased by the month from 134,000 in December to 142,000 in January. In January, US department stores held drastic clearance sales, but the performance of the retail industry only improved by 0.7 percent. Thus, the slight increase in retail sales for January might not be best interpreted optimistically. It would be better seen as yet further proof of a slump in consumption.
The above statistics reflect the situation on the economic front. Conditions on the political front, however, are tending toward even greater complexity. At present, the hawks are in power in the US government. US relations with Europe and Russia have become tense over the National Missile Defense plan, and the crisis in the Middle East is waxing. Clashes between Israelis and Palestinians may spin out of control at any time, and the US attacks on Iraq have had the effect of throwing oil on the fire of the Middle East situation.
Suppose there is turbulence in the Middle East and the price of oil skyrockets. The US will no doubt suffer, but Europe's dependence on oil is greater. The damage to unit growth in Europe caused by the influence of a rise in the price of oil will exceed that suffered by the US. Currently the US is weakening and the European economy is gradually getting stronger. US actions in the Middle East can't be said to completely lack considerations of global economic strategy.
2001 has just gotten underway, and the economic forecast looks grim. Taiwan must not fail to prepare contingency plans at the earliest possible date.
Nan Fang Shuo is publisher of The Journalist magazine.
Translated by Ethan Harkness
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