ADB predicts strong Asian growth in 2002

ADB predicts strong Asian growth in 2002

TOKYO (AFP): Asia will remain at the top of the world growth
league and will see a return to the good times by 2002, even if
it has to absorb the impact of the slowdown in the U.S. economy,
the Asian Development Bank said in its annual forecast published
on Thursday.

The Manila-based ADB's 'Asian Development Outlook 2001,'
unveiled in Tokyo, predicts growth in the region's developing
countries will slow from more than seven percent in calendar 2000
to 5.3 percent this year before recovering to 6.1 percent in
2002.

The forecast is based on the bank's "relatively sanguine
outlook" that global growth is set to experience a "relatively
shallow and short-term slowdown" to around 3.5 percent this year
from 4.8 percent in 2000, before picking up to almost 4.0 percent
in 2002.

"A deeper and more long-lived slowdown in the U.S. and the
uncertain outlook for Japan," are identified in the report as the
major risks for the global economy.

"The risks are especially significant for those DMCs
(developing member countries of the ADB), where recoveries depend
heavily on exports, where financial and corporate restructuring
is incomplete and where political uncertainties remain," the
report warned.

"The effect of the US slowdown on DMCs will depend heavily on
the behavior of intraregional trade," the report said, noting it
had grown significantly over the last decade, "and can play a
role in reducing the region's vulnerability to external factors."

The weakness of U.S. demand, which was the engine of the
region's spectacular recovery after the 1997-98 economic crisis,
will primarily affect the so-called newly industrialized
economies (NIEs) -- Hong Kong, Singapore, South Korea and Taiwan
-- and "the countries of Southeast Asia depending heavily on
technology exports and on the U.S. market."

The NIEs will see their growth rate fall from 8.4 percent in
2000 to just 4.3 percent this year, before rebounding to 5.6
percent next year, according to the ADB's analysis.

South Korea, which is curiously lumped together with the DMCs
by the ADB, even though it is a member of the OECD, is forecast
to chart the same course, with growth slowing from 8.8 percent in
2000 to 3.9 percent and then 5.5 percent next year.

The current slowdown in the United States will not have the
same impact as the 1991 recession, however, the ADB said, since
electronic exports from the region will increasingly be composed
of components for which global demand remains strong.

The exception will be China and Indonesia which are still
heavily dependent on consumer products, although in China's case,
the report makes clear the adverse effect is relative.

"Driven by domestic demand growth, the PRC economy is forecast
to slow somewhat but still grow by over 7 percent in 2001 and
2002," it said.

The other regional giant, India, should perform almost as
well, the ADB predicted, with growth of between 6.0 and 7.0
percent.

The ADB highlighted several reasons for its belief that the
current economic situation is fundamentally different from
1997/98, "and that another crisis is, therefore, extremely
unlikely."

For one thing, this time round, the external factor is
"primarily a real rather than a financial shock," the report
said.

Those countries hurt by the crisis now enjoy a much stronger
position in terms of current account surpluses and foreign
exchange reserves, and have embarked on corporate and financial
system reforms, it argued.

Another difference is that in terms of capital flows into the
region, a relatively stable level of foreign direct investment
has replaced volatile short-term bank loans.

But the bank warned the region's developing nations against
being complacent about "new and different weaknesses, in
particular for the five countries most seriously affected by the
last crisis -- Indonesia, Malaysia, the Philippines, South Korea
and Thailand.

The ADB's recommendation is for them to "move ahead with
needed structural reforms," and focus on domestic demand and the
too low, pre-crisis levels of fixed investment in order to reduce
their reliance on exports.