Asia recovery beats expectations: ADB, World Bank<\/p>\n
Alan Yonan Jr., Dow Jones, Singapore<\/p>\n
Most Asian economies are rebounding faster than expected,
\nthanks to renewed demand for the region's exports and successful
\neconomic stimulus efforts by local governments, two top
\nmultilateral lenders said in separate reports issued Tuesday.<\/p>\n
The assessments delivered by the Asian Development Bank and
\nWorld Bank in their semiannual outlooks for the region are
\nmarkedly more upbeat than in reports last fall when the view for
\nthe global economy was clouded by the Sept. 11 terrorist attacks
\nin the U.S.<\/p>\n
Compared with the recovery following the 1997-98 Asian
\nfinancial crisis, the current economic expansion is expected to
\nbe less intense, but more broad-based, the ADB said. A key factor
\nin the outlook is a pickup in domestic demand spurred by
\naggressive fiscal stimulus programs undertaken in a number of
\ncountries.<\/p>\n
The ADB is forecasting the Asia-Pacific region, excluding
\nJapan, to grow by 4.8 percent on average in 2002, up from 3.7
\npercent in 2001. The Bank expects the recovery to pick up pace in
\n2003 with growth of 5.8 percent. The scope of the ADB's Asia
\nDevelopment Outlook includes all of Asia and the South Pacific,
\nexcluding Japan.<\/p>\n
The World Bank, which limited its report to East and Southeast
\nAsian nations, excluding Japan, predicted the region will grow by
\n4.7 percent in 2002, up from 3.5 percent in 2001. Growth for 2003
\nis pegged at 5.6 percent.<\/p>\n
Across Asia, the economies expected to show the most
\nimprovement this year are South Korea, Malaysia, Singapore and
\nTaiwan, with the latter two swinging from economic contractions
\nin 2001 to expansions in 2002.<\/p>\n
The earlier-than-expected recovery in U.S. economic growth is
\nthe main external factor behind the improved outlook for Asia,
\nalthough expected improvements in Europe will also play a role,
\naccording to the reports. About 25 percent of Asia ex-Japan's
\nexports go the U.S., while 15 percent go to euro-zone economies
\nand 12 percent to Japan, the ADB said.<\/p>\n
Rising commodity prices, after several years of steep
\ndeclines, will help countries like Korea and Thailand whose
\neconomies rely on exports of such products, the World Bank said.
\nRising stock markets across the region and generally stable
\npolitical environments in Southeast Asia, also were cited as
\npositive factors.<\/p>\n
The biggest risk to the forecasts, the banks say, is the
\npossibility that U.S. growth won't live up to expectations.
\nRising oil prices could put a crimp in the U.S. recovery, the ADB
\nnoted.<\/p>\n
Crude oil futures contracts on the New York Mercantile
\nExchange are trading near a six-month high in excess of $26 a
\nbarrel.<\/p>\n
The ADB noted that turbulence in the Middle East is pushing
\ncrude oil prices toward the upper end of the US$22-US$28 range
\nset by the Organization of Petroleum Exporting Countries.<\/p>\n
But "market forces don't seem to warrant a long-run,
\nsubstantial increase in oil prices in the US$30s - we don't see
\nthat," said ADB assistant chief economist Jean Pierre Verbiest.<\/p>\n
Over the longer term, the primary risk to the region's
\neconomies would be a failure of government leaders to take
\nadvantage of their improving economies to move aggressively on
\nstructural reforms, according to the banks.<\/p>\n
"Governments should seize the moment to build upon recent
\ngains and deepen structural reforms to increase their chances of
\nmaintaining private sector demand," Homi Kharas, the World Bank's
\nchief economist for Asia and the Pacific, said in remarks to the
\nAmerican Chamber of Commerce in Singapore.<\/p>\n
Such reforms also create a more attractive climate for
\ndomestic and foreign investment, bolstering productivity growth
\nand fostering stable environment for consumers, Kharas added.<\/p>\n
The ADB report drew attention to the lingering non-performing
\nloan problem that continues to weigh on banking sectors in
\nseveral of Asian countries.<\/p>\n
"Nearly five years after the start of the financial crisis,
\nthe five most crisis-affected countries show uneven progress in
\nresolving the problem of high levels of NPLs in the finance
\nsector," according to the report.<\/p>\n
Of the four countries that implemented asset management
\ncompanies to deal with the bad loans, Indonesia and Thailand have
\nhad the greatest difficulty.<\/p>\n
The Indonesian government, which won praise recently for
\nfinally selling its stake in PT Bank Central Indonesia, has fared
\nthe worst, the ADB said.<\/p>\n
"Plagued by accusations of corruption and political opposition
\nto the sale of distressed companies to foreign entities, the
\nIndonesian Bank Restructuring Agency, formed in early 1998, had
\ndisposed of less than 7 percent of its assets by the end of
\n2001."<\/p>\n
The overhang of NPLs in Indonesia and Thailand has retarded
\neconomic recovery by delaying corporate restructuring, the ADB
\nsaid.<\/p>\n
NPLs in Indonesia stood at 14.7 percent of total loans at the
\nend of 2001, down from 49.2 percent at the end of 1998. In
\nThailand, the figure is 12.9 percent, down from 45.0 percent at
\nthe end of 1998.<\/p>\n
The Philippines, which initially had a less serious NPL
\nproblem, was the only one of the crisis countries that did not
\nset up an asset management company. NPLs there have risen to 17.4
\npercent from 11.0 percent at the end of 1998, due to economic
\nweakness, political turmoil and the global slowdown, the ADB
\nsaid.<\/p>",
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