Global and Asian Economies 2001

2001 was a watershed year as the world economy experienced its weakest growth in a decade. The global economy slowed from 4.7% in 2000 to a mere 2.4% in 2001, the most severe deceleration since the 1974 oil shock. The US economy went into recession in March 2001, bringing its unprecedented 10-year growth to a halt. Japan’s economy slipped into recession for the fourth time in a decade, contracting by 0.5% in 2001 as business spending plunged. The International Monetary Fund (IMF) also expressed fears that the Euro zone slump could be more prolonged than expected.

The September 11 events in the US exacerbated an already difficult situation in the global economy. In its bid to bolster the US economy, the US Federal Reserve reduced key interest rates 11 times to a 40-year low of 1.75% as at end-2001. The US economy brightened towards the end of 2001, as it unexpectedly expanded 1.7% in 4Q2001 on the surge in consumer and government spending, reversing a decline of 1.3% in 3Q2001. This brings 2001 full-year GDP growth to 1.2%.

2001 and 2000 Economic Growth Rates

In Asia, export-dependent countries such as Korea, Hong Kong, Singapore, Indonesia, Malaysia, Philippines and Thailand were adversely affected by the economic fallout in the US and Japan. The Korean economy slowed but still registered positive growth of 3.0% in 2001, a decline from 9.3% in 2000. Consumer spending remained resilient as fiscal pump-priming measures and low interest rates helped to cushion the economic slowdown. Dragged down by the global economic downturn, Hong Kong’s economy grew 0.1% in 2001, versus a 10.5% growth the previous year. Singapore’s economy shrank 2.0%, compared with a robust 10.3% a year ago. The Indonesian economy expanded 3.3% in 2001, compared with 4.8% growth the year before. The Malaysian economy avoided a full-year recession, showing only 0.5% decline in the last quarter of 2001, thereby bringing full-year GDP growth to 0.4%. Philippines’ GDP grew 3.4% in 2001, helped by consumption spending. Thailand’s economy grew 1.8% in 2001, partly fuelled by consumption spending on housing and cars. In Vietnam, growth is estimated at 7.1% in 2001. The Bilateral Trade Agreement between Vietnam and US in December 2001 is expected to increase investments from the US as well as other countries.

Almost alone among Asia’s major economies, China appeared least affected by the global slowdown. Its huge and vibrant domestic market was able to sustain a GDP growth rate of 7.3%, making China the fastest growing economy in the world. Growth in retail sales, already a strong 9.9% in 2000, accelerated to 10.1% in 2001. Retail sales have been fuelled by strong wage growth in non-state owned enterprises and civil servants’ pay rise. Apart from private consumption, strong economic growth in the second half of the year was sustained through the government’s fiscal stimulus and increased foreign investment.

The Singapore Economy - Sectorial Growth Rates