Jan. 23 (Bloomberg) -- Recession across the world's biggest economies is the main concern of chief executive officers gathering today in the Swiss ski resort of Davos.
The threat of a decline ranked first among the concerns of business leaders surveyed by PricewaterhouseCoopers LLP as executives including News Corp. Chairman Rupert Murdoch and Merrill Lynch & Co.'s John Thain attend the World Economic Forum's annual meeting. It was the first time that the risk of a slump topped the survey, which the accounting and consulting firm has conducted for 11 years.
``The big concern on the minds of CEOs is an economic recession,'' said Samuel DiPiazza, chief executive of PricewaterhouseCoopers, in an interview in Davos.
The assembly of business leaders, investors, policy makers and academics takes place after stock markets from Hong Kong to London tumbled on speculation the world economy will be hobbled as a U.S. slowdown spreads. While the Federal Reserve yesterday lowered its benchmark interest rate in the first emergency shift since 2001, U.S. stocks still fell for a fifth day.
``There's panic in the markets and the effect of the Fed's rate move is already fizzling out,'' said Axel Heitmann, a delegate and chief executive officer of Lanxess AG, a German maker of chemicals used by the leather and automotive industries.
Europe, U.S. Gloomiest
Just half the 1,150 executives surveyed by PricewaterhouseCoopers said they were ``very confident'' about revenue growth this year, down from 52 percent last year. The drop was the first since 2003 and most pronounced in the U.S. and Europe.
The prospect of shrinking economies beat out over- regulation, terrorism and a dozen other challenges listed in the PricewaterhouseCoopers survey. The mood is in contrast to the buoyancy of last year's meeting, where guests celebrated a bumper year of profits and bonuses, and the strongest global economy in three decades on the ski slopes and party circuit.
Last year ``it was go-go-go, we're all going to win,'' said DiPiazza. ``The CEOs of the developed world know we're in for a bumpy ride.''
In the U.S., 36 percent of executives said they were ``very confident,'' compared with 54 percent last year, while 44 percent of Europeans expressed the same sentiment, down from 52 percent. Japanese executives were the most skittish, with just 31 percent calling themselves very optimistic.
``We have this very serious financial crisis with global repercussions,'' Kenneth Rogoff, a Harvard University economist said in Luxembourg yesterday as he headed to Davos. ``The U.S. is very lucky if the economy grows out slowly.''
Subprime Collapse
What's changed in the past year is the spreading fallout from the U.S. housing recession, which triggered a collapse in the market for subprime mortgages and investments tied to them. That has forced lenders to retrench, threatening consumer spending and business investment by pushing up credit costs around the world.
Economists at Goldman Sachs Group Inc. and Merrill Lynch are already predicting the world's biggest economy will fall this year into its first recession in seven years. The Fed yesterday said it cut rates ``in view of a weakening of the economic outlook and increasing downside risks to growth.''
The reduction in the target overnight lending rate to 3.5 percent from 4.25 percent was the biggest single cut since the Fed began using the rate as the principal tool of monetary policy around 1990.
Dollar, Oil
A falling dollar and near-record oil costs are providing more sources of discomfort for Davos executives.
``We are confronting a crisis, in many ways,'' Klaus Schwab, the forum's founder and chairman, said in an interview. ``The mood is concerned.''
One source of comfort was increased optimism among executives in emerging markets, reflecting the recent economic rise of countries such as China and India. In both China and Russia, 73 percent said they were ``very confident'' about revenue expansion in the year ahead, while 90 percent of those in India reported the same level of optimism. The level of optimism in Russia was more than double that of a year ago.
``Markets in China, India and Russia are growing much better and to a certain extent will provide compensation for the world economy for whatever losses the U.S. has,'' said Andrei Kostin, chief executive officer of VTB Group, Russia's second- biggest bank, in an interview.
Executives reported less appetite for international mergers and acquisitions, with just 38 percent of those surveyed saying they had completed or planned to conclude such a transaction, down from 47 percent last year.
The PricewaterhouseCoopers survey was conducted between September and November. About 40 percent of respondents were from companies with annual revenue of more than $1 billion.
Jan. 7 (Bloomberg) -- Gordon Brown's plane will have barely departed New Delhi's Indira Gandhi International Airport this month before Nicolas Sarkozy's arrives with another contingent of executives seeking opportunities in India's rapidly opening markets.
The British prime minister and the French president, separately visiting the week of Jan. 20, are bringing along commercial delegations including retailers Tesco Plc and Carrefour SA, attracted by a burgeoning middle class and loosening curbs on foreign ownership in the nation of 1.1 billion people.
Overseas investment in India may double in 2008 for a second straight year to reach $30 billion, the government forecasts, as the world's second-fastest growing major economy arrives at what Lehman Brothers Holdings Inc. calls its ``take- off'' point. That's when consumer demand and business spending start feeding off one another and drive even more investment.
``India's growth acceleration is not a flash in the pan,'' says Robert Subbaraman, chief economist at Lehman Brothers Asia in Hong Kong. ``A middle class is fast emerging, which is spurring demand as consumption and investment interact.''
Like China and South Korea in previous decades, India is benefiting from an increasingly open economy that has already stimulated enough growth to double per-capita income since 2000, according to Lehman. The resulting surge in demand for consumer goods has tripled mobile phone use in two years and fueled a 29 percent jump in sales of microwave ovens in 2007, Lehman says.
Purchasing Power
With the explosion of purchasing power, India's economy is poised to expand 9 percent for a third straight year, while the U.S., Europe and Japan slow to less than 3 percent growth.
McKinsey & Co., the New York-based consulting firm, estimates that India's middle class -- those with annual disposable incomes between $4,380 and $21,890 in current dollars -- will increase more than 10-fold to 583 million by 2025.
India's appeal is more than a matter of demographics. Prime Minister Manmohan Singh, who as finance minister in 1991 started dismantling barriers to foreign investment and other Soviet- style controls on industry, is preparing to permit overseas companies to build retail chains in the country. That's prompting interest from companies including Hertfordshire-based Tesco, Britain's largest retailer, and Paris-based Carrefour, which operates supermarkets on four continents.
Bigger Stakes
Singh's government is also moving to raise the limit on foreign equity stakes in local insurers to 49 percent from 26 percent, and has a roadmap to let foreign banks increase holdings in India's private banks. Brown's party will include representatives of Prudential Plc, the U.K.'s second-biggest insurer, and Barclays Plc, the No. 3 British bank, both based in London.
``India has long been noted for its superb `micro' -- good companies, rule of law, democracy,'' says Stephen Roach, chairman of Morgan Stanley in Asia. ``What has been missing is the `macro' -- foreign direct investments, infrastructure. What's encouraging to me about India now is that the macro is starting to improve and is reinforcing the already positive micro.''
Foreign ownership in telecommunications has helped India become the world's third-largest user of telecom services after China and the U.S. It's the world's fastest-growing wireless market.
`Heart of Globalization'
``India is a country of enormous opportunity; it's the heart of globalization in a way,'' says Ben Verwaayen, chief executive officer of London-based BT Group Plc, the U.K.'s largest phone company. ``You see a growing base for companies from around the globe, being here not just for this region itself, but being here as a kind of base for what they can do in other parts of the world as well.''
San Jose, California-based Cisco Systems Inc., the world's largest maker of computer-networking equipment, plans to triple its Indian workforce to 10,000 by 2010, Chief Executive Officer John Chambers said in October.
Automakers including General Motors Corp. and Suzuki Motor Corp. are spending more than $6.6 billion to build new factories in the country. PricewaterhouseCoopers LLP says India's auto output will grow about 17 percent annually until 2011, the fastest among the 20 largest carmaking nations.
India's higher profile in the global economy not only makes it a magnet for foreign investment, but also gives its companies a bigger role on the world stage.
Overseas Acquisitions
Indian companies led by Tata Steel Ltd. and Hindalco Industries Ltd., both based in Mumbai, completed a record $39.2 billion of overseas acquisitions in 2007.
Tata's $12.9 billion purchase of Britain's Corus Group Plc, the biggest overseas takeover by an Indian company, made it the world's fifth-biggest steelmaker. Buying Novelis Inc. of Atlanta provided Hindalco, India's biggest aluminum producer, access to customers such as GM and Coca-Cola Co. The trend is continuing: Tata Motors Ltd. of Mumbai, India's largest truckmaker, last week was selected as the preferred bidder for Ford Motor Co.'s Jaguar and Land Rover units, the U.S. automaker announced.
Brown and Sarkozy are joining a parade of world leaders coming to India with agendas that include closer commercial ties. U.S. Treasury Secretary Henry Paulson, visiting in October, said U.S. companies will participate in India's $500 billion program to modernize roads, ports, power and other infrastructure by 2012. The U.S. will help India transform its financial capital, Mumbai, into an international financial center, he said.
During an August visit, then Japanese Prime Minister Shinzo Abe said Japan will help plan a $90 billion infrastructure corridor between New Delhi and Mumbai, including freight lines, power stations and improved access to ports and airports.
Impediment
Such projects may reduce one of the biggest remaining impediments to doing business in India -- poor infrastructure. For all the expansion in the Indian market, its foreign direct investment still pales in comparison to what China has received -- about $60 billion in each of the past three years.
It takes 24 days for Indian exports to reach the U.S. compared with only 15 days from China and 12 from Hong Kong, according to Lehman Brothers.
``If India doesn't get its act together on infrastructure urgently, then it can never realize its aim of accelerating growth,'' says Vineet Agarwal, executive director of Gurgaon- based Transport Corporation of India Ltd., the nation's biggest cargo transportation and logistics services company.
Even as India's economy reaches take-off speed, almost 300 million people continue to live on less than $1 a day, according to the World Bank.
Fewer Poor
The absolute number of poor in India fell for the first time between 1999 and 2004 after the government's policies to allow more foreign investment and reduce regulation on industry spurred growth, according to the Paris-based Organization for Economic Cooperation and Development.
``The Chinese take-off began in the 1980s and didn't show through in terms of increased living standards for the majority for quite some time,'' says Howard Davies, director of the London School of Economics and a former chairman of the U.K. Financial Services Authority. ``Just the same way, India has got the economic take-off but it needs to be sustained for a decade before you really see the place looking different.''
-- With reporting by Chris Burns and Carol Massar in New Delhi Editors: Mark Rohner, Christopher Wellisz
Jan. 2 (Bloomberg) -- Singapore's economy unexpectedly contracted last quarter as factory output slowed, suggesting Asia's export-dependent markets may face increased risks from slower global growth.
Gross domestic product shrank an annualized 3.2 percent after adjusting for inflation, the first decline in 18 quarters, and followed a revised 4.4 percent expansion in the third quarter, the trade ministry said in a statement today. Economists were expecting a 3.1 percent gain.
Singapore's figures give economists an insight into how turmoil in global markets and the subprime-mortgage crisis in the U.S., the region's biggest export destination, may affect Asia's expansion. South Korea today said exports in December grew less than expected, and joined Taiwan in warning that easing demand for semiconductors, mobile phones and computers portends weaker growth in 2008.
``We definitely should expect to see more softness in exports in the next couple of quarters, and that's bad news for electronics-heavy Asian economies,'' said Kit Wei Zheng, an economist at Citigroup Inc. in Singapore. ``That means slower growth for Singapore and the rest of Asia.''
The Singapore dollar rose 0.1 percent to S$1.4406 per U.S. dollar as of 1 p.m. in Singapore. The benchmark Straits Times Index fell 0.8 percent to 3,453.15.
China, South Korea and the Philippines are due to report fourth-quarter GDP numbers later this month, while Japan, Taiwan and Malaysia are scheduled to release theirs in February.
Factory Output
Manufacturing climbed 0.5 percent in the last three months of 2007 from a year earlier, the smallest increase in 4 1/2 years. Output growth slowed from a revised 10.3 percent in the July-September period as pharmaceutical plants produced fewer drugs, the trade ministry said.
The Asian Development Bank last month said growth in emerging East Asia in 2008 will be 8 percent, half a percentage point lower than last year. The region is twice as reliant on exports as the rest of the world, with 60 percent of overseas sales ultimately destined for the U.S., Europe and Japan.
From a year earlier, Singapore's $132 billion economy grew 6 percent in the fourth quarter after gaining a revised 9 percent in the previous three months. Economists were expecting 7.7 percent growth.
``There's no imminent turnaround in electronics and we're unlikely to see a recovery in the next six months,'' said Irvin Seah, an economist at DBS Group Holdings Ltd. in Singapore. ``Pharmaceuticals, a key support for manufacturing, has been losing steam.''
Electronics Slump
Singapore's electronic exports have dropped each month since February, mired in the worst slump in five years. South Korea yesterday lowered its growth forecast for 2008, pointing to the likelihood of slowing exports. Taiwan is also predicting an easing in overseas shipments this year which it said will make its growth target ``highly challenging.''
Hynix Semiconductor Inc. Chief Executive Officer Kim Jong Kap last week told employees of the world's second-largest maker of memory chips, based in Ichon, South Korea, that ``a difficult period'' is foreseen for the first quarter or the first half.
South Korea's exports rose a less-than-expected 15.5 percent in December from a year earlier, the Commerce Ministry reported today. Overseas shipments are forecast to increase 11.6 percent in 2008, the ministry said.
Singapore's services industry climbed 8.3 percent from a year earlier, matching the growth rate in the previous three- month period.
Economists said demand for financial services probably eased as the rout in global credit markets increased risk aversion and the city-state's government implemented measures to cool the property market.
Stocks Tumble
Global stock markets have lost $1.6 trillion in value since October and the collapse of the subprime-mortgage market in the U.S. triggered more than $80 billion in writedowns among the world's largest banks.
``Singapore's financial services industry has been affected by the shadow of the subprime problem,'' Seah said. ``Investors are more cautious and that has slowed down activity.''
The island's burgeoning construction industry prevented a wider contraction in the economy last quarter as companies such as Exxon Mobil Corp. set up new plants and property developers build new office towers and condominiums. Southeast Asia's fourth-largest economy reported a record S$16 billion ($11 billion) in fixed-asset investments last year.
Construction surged 24.4 percent from a year earlier, after a revised 19.2 percent gain in the three months ended September.
The economy advanced 7.5 percent in 2007, easing from a 7.9 percent rate of expansion the year before. The government expects growth to be between 4.5 percent and 6.5 percent in 2008.
Singapore's growth had raised concern the economy is overheating, with consumer prices rising at the fastest pace in more than 25 years. Policy makers expect inflation to be between 3.5 percent and 4.5 percent this year, accelerating from a forecast average of 2 percent in 2007.
The figures today are computed from data for October and November. Revised numbers, including nominal gross domestic product, will be released next month.
