Industry News

Sep 04,2019  Industry News.

Asian countries adjust policies to stimulate economic growth.

In response to the downward pressure on economic growth and external influences, many Asian countries have announced the latest economic adjustment policies, aiming to stimulate the economy and prevent the downward trend from worsening.

South Korea announces large-scale budget

In response to the negative impact of economic growth and the external environment, the South Korean government announced a draft 2020 budget of 513.5 trillion won (1 US dollar equivalent to 1213 won) at the end of August, with a total increase of 9.3% over the previous year. This is the second consecutive year that the Korean government has proposed a budget increase of more than 9% year-on-year. The draft budget has yet to be considered and voted by the Congress.

In this draft budget covering 12 major areas, the “industry, SMEs and energy” sector saw the largest increase, with an increase of 27.5% compared to 2019. Korean media analysts believe that this shows the government's determination to boost economic vitality. The second largest increase was in the environmental sector, which increased by 19.3% year-on-year. The focus included the government's plan to establish a fine particle response system.

The Korean government plans to increase its investment in science and technology research and development by 17.3% in 2020, the highest in 10 years. The Korea Ministry of Science, Technology, and Information and Communications said that of the total budget of 24.1 trillion won, 1.7 trillion won will be used to promote the independence of key technology areas in order to cope with external influences such as Japan’s export control measures against Korea; 2.3 trillion won will be used. To strengthen the basic research and development system and cultivate talents such as outstanding engineers and scientists to promote innovation and growth.

In 2020, the Korean government has a budget of 181.6 trillion won in the health, welfare and labor sectors, accounting for the largest proportion of the 12 fields. Among them, the budget for increasing employment was 25.8 trillion won, an increase of 21.3% over the same period last year.

In addition, the total foreign budget is 2.73 trillion, an increase of 11.5% year-on-year, much higher than the 3.9% increase in 2019. The total defense budget is 50.15 trillion won, an increase of 7.4% over 2019. The South Korean Defense Ministry said that about a third of the budget will be used for weapons procurement and other projects to strengthen defense capabilities. South Korean media said that if the draft budget is passed, it will be the first time that South Korea’s defense spending exceeds 50 trillion won.

South Korean Deputy Prime Minister and Minister of Planning and Finance Minister Hong Nanji said at the press conference that it is very difficult for South Korea to achieve economic growth targets due to the global trade situation and external environment. The government hopes to promote the economy to return to the growth track with a proactive fiscal policy.

In the first quarter of this year, the South Korean economy contracted by 0.4% from the previous quarter, the worst performance since the fourth quarter of 2008. Although the economy resumed growth in the second quarter and avoided the “technical recession”, the economic outlook in South Korea is still not optimistic due to factors such as the tightening of the external environment.

India's multi-policy boosts the economy

The Indian government has decided to relax the foreign direct investment regulations and hopes to attract more foreign investment to boost the Indian economy.

The Indian government announced that it will relax regulations on foreign direct investment in the retail and manufacturing sectors. For example, in the single-brand retail sector, India previously required foreign retailers to purchase 30% of their goods locally from India. According to the new regulations, among the total amount of goods purchased by foreign retailers within 5 years, the proportion of goods purchased locally from India can be no less than 30%.

The Ministry of Commerce and Industry of India said that the relaxation of foreign direct investment regulations will make India more attractive to foreign investment, which will lead to increased investment and employment growth.

Analysts believe that the Indian government's current liberalization of foreign direct investment regulations is related to the recent decline in India's economic growth. According to data from the Central Bureau of Statistics of India, the economic growth rate of India in the 2018-2019 fiscal year (April 2018 to March 2019) was 6.8%, lower than the previous fiscal year. From January to March this year, India's economic growth rate was only 5.8%, the lowest level in the past five years.

According to the latest data released by the Central Bureau of Statistics of India, India’s economic growth rate in the second quarter of this year was only 5%, far below market expectations, the lowest level since the first quarter of 2013.

The data shows that a sharp slowdown in industrial and agricultural output growth is a major factor in the decline in India's economic growth in the second quarter. Among them, the manufacturing industry only increased by 0.6% in the quarter, which was much lower than 12.1% in the same period last year.

The Indian economy grew by 8% in the second quarter of last year, and the growth rate continued to decline, dropping to 5.8% in the first quarter of this year. The market generally expects India's economic growth rate to be lower than 5.8% in the second quarter of this year, and most economic analysts expect it to be around 5.5%.

In addition, due to the fiscal deficit target, India has limited space to use fiscal policy to stimulate the economy. Therefore, increasing the intensity of attracting foreign investment has become a pragmatic choice.

According to data released by the Indian government, India's fiscal year 2018-2019 attracted foreign direct investment of 64.37 billion US dollars, a record high.

Since February of this year, the Bank of India has cut interest rates four times to boost the economy. As the economic growth continues to decline, coupled with little inflationary pressure, the market expects the Indian central bank to cut interest rates again in October.

The global economy faces challenges

According to data updated by the United Nations Conference on Trade and Development in August 2019, the balance of global overseas direct investment was 30.9 trillion US dollars in 2018, a decrease of 4% over the previous year.

The same trend is still present in 2019. The British "Financial Times" database "fDiMarkets" shows that the company's investment projects (excluding mergers and acquisitions) peaked at 8152 pieces from January to June 2018, and 6243 pieces from January to June 2019, creating the second half of 2009. The lowest level since.

The Nikkei News Agency article reported that in the face of the risk of trade disputes, traditional industries with product manufacturing as the core can only reduce overseas investment. Philip Hammer, who is familiar with overseas investment in the University of Mainz, Johannes Gutenberg, Germany, said that “in the medium term, it will lower economic growth”. On the other hand, the new structural changes of “digitalization of the economy” are likely to expand throughout the world in the future.

As global market confidence and investment decline, emerging market countries outside Asia also join the stimulus economic policy camp. According to market institutions, some emerging market countries may cut interest rates.

Previous Page：Plate later market price will be strong
Next Page：Baosteel expected to keep or drop steel prices for Sep

BROWSE SIMILAR Industry News