Factories slash output .hurriyet2008-detailbox-newslink { font-family: Arial, Helvetica, sans-serif; font-size:13px; font-weight:bold; text-decoration:none; color:#000000;} .hurriyet2008-detailbox-newslink:hover { font-family: Arial, Helvetica, sans-serif; font-size:13px; font-weight:bold; text-decoration:underline; color:#990000;} BEIJING - As the world's major export destinations, such as the United States and Japan, fall into recession, emerging markets whose growth depends on higher exports suffer the consequences. Latest figures show manufacturing in China, India and Russia is declining rapidly

Factories in China, India and Russia slashed output and jobs at a record pace in December in another sign the world's largest emerging markets were wilting under the recession that has gripped most industrialized nations.

Economists and policymakers had seen China, Russia, India and Brazil, with the their vast markets and rising wealth, as the engines of growth that could save the world from recession. Those hopes are fading fast and forecasts are getting gloomier.

South Korea warned exporters 2009 would be tougher than last year, and Singapore said it's export-dependent economy may shrink 2 percent next year. Citigroup said the city state's economy, a bellwether for global trade, would shrink 2.8 percent, the steepest in its history.

And everywhere, from job loses at Chinese factories to the biggest drop in Korean house prices in five years, there were signs that the export slowdown was rippling through domestic economies.

"What is worrying is that the weakness has spread rapidly from the externally-oriented sectors to domestically oriented sectors too," analysts at OCBC Bank in Singapore said in a note after the country announced gross domestic product data.

Markets brighten
In contrast to the rapidly darkening economic outlook, the mood in markets has brightened slightly. Having squirreled cash into safe havens for much of the past quarter, investors are eyeing assets pummelled in the financial turmoil of 2008. Asian shares and the Australian and New Zealand dollars gained on Friday while the Swiss franc and U.S. Treasuries eased, in a tentative sign risk appetite was growing after a year in which $14 trillion was wiped off stock investors' books.

"It feels like we've passed through the eye of the storm," Robert Rennie, chief currency strategist at Westpac in Sydney said of the financial crisis triggered by U.S. bank failures last year. "That's not to say there isn't another storm on the horizon, but for the moment the intense pessimism of October and November seems to have eased."

For Chinese factories and policymakers looking to contain an economic slump, there was much cause for pessimism.

Manufacturing activity fell for a fifth month as the global financial crisis bludgeoned demand for exports, the Purchasing Managers' Index showed on Friday. The index rose to 41.2, up from the record low of 40.9 plumbed in November, indicating that while manufacturing was still shrinking, the pace had slowed from November's record. The output sub-index fell to 38.6, signalling the sharpest contraction in production since the survey was launched in April 2004.

Technical recession
"With five back-to-back PMIs signalling contraction, the manufacturing sector, which accounts for 43 percent of the Chinese economy, is close to technical recession," Eric Fishwick, head of economic research at CLSA, which publishes the index.

For Chinese policymakers worried about social stability the most alarming news may have been the employment sub-index, which showed factories shedding jobs at the fastest pace on record. PMIs in Russia and India offered similarly grim readings with the headline, employment and output indexes sinking to record lows. The contraction in Russian manufacturing is deeper than the the slump during the 1998 financial crisis, which saw bank collapses and a default on sovereign debt. In India, factories cut jobs for the first time in the survey's three and a half year history to reduce costs.

In all three countries, factories reported slumping export orders with recession chilling demand in the their largest markets - the United States, Japan and Europe.

South Korea, which ships a fifth of its exports to China, said export growth this year would be about 1 percent, the weakest since 2001. Exports in December dropped 17.4 percent from a year earlier, more than economists had expected.

Economy in Singapore
Singapore's economy contracted at a seasonally adjusted, annualised pace of 12.5 percent during the October-December quarter, following a revised 5.4 percent decline in July-September.

The government cut its economic forecast to a range between a decline of 2 percent and growth of 1 percent in 2009, compared with a range that went from a contraction of 1 percent to growth of 2 percent predicted in November. Citigroup said that forecast was still too optimistic.

"If we are correct, 2009 will mark the most severe recession in Singapore's history, surpassing the Asian Financial Crisis and the 2001 tech recession," said Citigroup economist Kit Wei Zheng.