ADB cuts growth forecast for RI and other four countries

ADB cuts growth forecast for RI and other four countries

MANILA (AFP): The Asian Development Bank (ADB) on Monday
drastically cut its 2001 economic growth forecast for Indonesia
and four other Asian countries due to the U.S.-led global
slowdown and weak electronics demand.

The average economic growth forecast for Malaysia, Indonesia,
South Korea, Thailand and the Philippines was cut to 4.0 percent
this year from 7.1 percent in 2000.

"The consensus among Asia experts is that the growth rate for
the five countries could decline to 4.0 percent this year," the
Manila-based ADB said in its Asia Recovery Report.

The report is a bi-annual review of the economic recovery of
the five East Asian nations worst affected by the financial
crisis which erupted in mid-1997 and plunged most of the region
into recession.

The bank said Indonesia needed to resolve its political
uncertainties and achieve faster progress in asset disposal and
bank restructuring to restore investor confidence.

The forecast is based on consensus views of about 130 Asian
experts.

"The downside risks are much greater now than half a year
ago," Yoshihiro Iwasaki, head of ADB's regional economic
monitoring unit, told a media briefing when tabling the report.

He said average growth forecasts of the five Asian nations
were slashed because of the "deteriorating economic situation"
stemming from the U.S.-led global economic slowdown and weakening
of electronics demand.

But Iwasaki said: "Our estimates suggest that the recovery
will be slower in the crisis-hit nations but not derailed."

Fears of an imminent recession in the United States coupled
with the continued downturn of the stock market in the world's
biggest economy as well as a renewed slump in the Japanese
economy have dampened Asian shares, currencies and exports.

The Asian economies were hit harder because of a global slump
in electronics, their key export item.

Pradumna Rana, manager for ADB's regional economic monitoring
unit, said Malaysia would be the worst hit by the global slowdown
followed by South Korea, partly because of their high dependence
on exports and the U.S. market.

The ADB projections showed economic growth in Malaysia
dropping to 5.2 percent in 2001, 4.4 percent in South Korea, 3.6
percent in Indonesia, 3.5 percent in Thailand and 3.0 to 3.5
percent in the Philippines.

"The consensus view is that the landing this year would be a
bit harder than a soft landing," Rana said.

ADB economists said growth could accelerate again in 2002 in
the five nations -- projecting 4.3 percent in Indonesia, 5.3
percent in South Korea, 6.1 percent in Malaysia, 4.3 percent in
Thailand and about 3.5 percent in the Philippines.

Rana said the 2001 forecast for the Philippines was on a wide
range because "its achievement will depend on reforms" undertaken
by the new government of President Gloria Arroyo.

The bank said the Philippines' heavy dependence on electronics
exports and its tight links to the U.S. economy meant that there
could be "significant knock-on effects."

For Malaysia, the ADB said "one concern is that, with a pegged
exchange rate, domestic absorption will have to bear the brunt of
an adjustment to slower growth of external demand and a
deteriorating current account position."

In Thailand, the ADB said that while political uncertainty had
receded, it remained to be seen whether structural reforms would
be accelerated under the new administration of Prime Minister
Thaksin Shinawatra.