JP\/13\/Asia<\/p>\n
Asia to remain world's fastest-growing region: IMF<\/p>\n
Takeshi Takeuchi
\nDow Jones
\nWashington<\/p>\n
Asia's 2003 economic prospects have dimmed only slightly as a
\nresult of SARS, with the region excluding Japan still on track to
\npost the world's strongest growth this year, the International
\nMonetary Fund (IMF) said on Thursday.<\/p>\n
The IMF, in its World Economic Outlook, also urged Asian
\ngovernments to focus on boosting domestic demand and nudged them
\ntoward letting their currencies move more freely.<\/p>\n
The international lender trimmed its Asia ex-Japan forecast
\nfor 2003 economic growth to 5.9 percent from its April estimate
\nof 6.0 percent, saying growth remains on track with help from
\nincreasing exports and the apparent containment of SARS.<\/p>\n
Despite the impact of the flu-like disease - which hit China,
\nHong Kong, Taiwan and Singapore especially hard in the second
\nquarter and damped exports and tourism region-wide - Asia's
\nexpected expansion remains nearly double the 3.2 percent growth
\nthat the IMF forecasts for the global economy.<\/p>\n
Moreover, the IMF predicts in its semiannual report that Asia
\nwill accelerate to 6.2 percent growth next year, matching its
\n2002 performance, as the global economy picks up.<\/p>\n
Within Asia, gross domestic product growth is forecast to
\nrange between 0.5 percent for Singapore and China's 7.5 percent.<\/p>\n
Above all, Asia is benefiting from overseas demand, the IMF
\nsaid: "A notable feature of recent performance has been the
\nsupport to output growth provided by net exports."<\/p>\n
But such export-dependent expansion is vulnerable to "the
\nvagaries of the global economic cycle," the IMF said, stressing
\nthe need for Asia to boost demand at home.<\/p>\n
A shift to a domestic-demand-led recovery is all the more
\nimportant for Asia because the dollar's recent declining trend
\nwill inevitably cause a rebalancing of global demand and could
\ncurb Asia's exports, the report said.<\/p>\n
To achieve a better balance between exports and domestic
\ndemand, the IMF urged Asian countries to adopt more flexible
\nexchange rates.<\/p>\n
While saying structural reforms should be the primary means to
\nboost domestic demand, the IMF said, "Greater exchange-rate
\nflexibility in some countries would also help" by increasing
\n"consumption opportunities for local residents" in countries
\nwhere exchange rates are undervalued.<\/p>\n
The IMF also said more flexible exchange rates would bring
\nother benefits, such as lowering the holding costs of official
\nforeign-exchange reserves. Asian central banks have by far the
\nlargest foreign reserves in the world, and these have swelled
\nrecently as some countries sell their own currencies for dollars
\nto keep local units from rising in value.<\/p>\n
Calling for currency flexibility is a reiteration of standard
\nIMF advice but it comes at a politically charged time. The U.S.
\nin particular is growing impatient with China, which essentially
\npegs its yuan around 8.28 to the dollar. Treasury Secretary John
\nSnow visited China this month and urged the government to move
\ntoward a more flexible currency regime.<\/p>\n
Beijing rebuffed any call to change the peg in the near
\nfuture, and Snow got little support from other Asia-Pacific
\nfinance ministers for his currency-liberalization campaign. But
\nthe issue continues to heat up, with U.S. lawmakers pushing the
\ngovernment to take up currency "manipulation" as a trade issue.
\nU.S. manufacturers claim China is keeping its currency - and
\ntherefore its exports - artificially cheap, undercutting U.S.
\nproducts and costing American jobs.<\/p>\n
In addition to China, Hong Kong and Malaysia peg their
\ncurrencies to the dollar, which has declined significantly this
\nyear against most other units. Singapore keeps its dollar in a
\nnarrow range against a trade-weighted basket of currencies.<\/p>\n
The IMF also advised Asian countries to remain alert to a re-
\nemergence of SARS, which many public health experts have warned
\nis a distinct possibility.<\/p>\n
Although the report acknowledges SARS appears largely
\ncontained, "There could be lagged effects on output owing to
\ndelayed investment and further effects if the epidemic recurs in
\nthe winter."<\/p>\n
Monetary and fiscal policy responses of Asian countries so far
\nhave been mostly appropriate, the IMF said.<\/p>\n
To limit adverse effects of SARS and the U.S-led war against
\nIraq in the first half of this year, "monetary policy has been
\neased" and "fiscal stimulus has also been provided" in a number
\nof countries.<\/p>\n
Still, the IMF said it's important to resolve bad-debt
\nproblems in China, Indonesia, the Philippines and Thailand. It
\nalso urged India, South Korea, the Philippines and Thailand to
\nstrengthen insolvency laws to facilitate corporate restructuring.<\/p>\n
IMF's Forecast GDP Growth Rates<\/p>\n
(percent per year)<\/p>\n
2002 2003 2004<\/p>\n
All Emerging Asia 6.2 5.9 6.2<\/p>\n
Newly Industrialized
\nEconomies 4.8 2.3 4.2
\n- Hong Kong 2.3 1.5 2.8
\n- South Korea 6.3 2.5 4.7
\n- Singapore 2.2 0.5 4.2
\n- Taiwan 3.5 2.7 3.8<\/p>\n
ASEAN-4 4.3 4.1 4.4
\n- Indonesia 3.7 3.5 4.0
\n- Malaysia 4.1 4.2 5.3
\n- Philippines 4.4 4.0 4.0
\n- Thailand 5.3 5.0 5.1<\/p>\n
South Asia 4.6 5.5 5.8
\n- Bangladesh 4.9 5.4 5.8
\n- India 4.7 5.6 5.9
\n- Pakistan 4.4 5.4 5.1<\/p>\n
Formerly Centrally
\nPlanned Economies 7.9 7.4 7.5
\n- China 8.0 7.5 7.5
\n- Vietnam 5.8 6.0 7.0<\/p>",
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