ADB sharply upgrades Asian growth projections

ADB sharply upgrades Asian growth projections

MANILA (AFP): The Asian Development Bank (ADB) sharply upgraded this year's regional economic growth forecasts to 5.7 percent Tuesday on the back of a "far better than expected" rebound from crisis.

The Manila-based bank boosted the original projection of 3.8 percent owing to strong recovery by the humbled economic tigers of South Korea and Southeast Asia and robust growth in China.

Bank research papers presented at a workshop here also saw Japan "beginning to emerge from the recession" and detected sustained growth in South Asia.

"The 1999 performance appears to be the beginning of a cyclical upswing as prospects for 2000 also appear strong -- supported by a higher rate of growth of world GDP (gross domestic product) and trade," the ADB said in a report released four days ahead of a summit by Southeast Asian leaders here.

The bank said the Asian economy would also grow by 5.7 percent in 2000.

However, the ADB warned the region, which grew by 2.3 percent in 1998, against slackening in reform efforts "if growth momentum is to be maintained and social costs of any future downturns are to be minimized."

Downside risks for this year's recovery are "now minimal" with the stability of the U.S. and Japanese economies, the peaceful political transition in Indonesia and projected higher consumption in the three months to December.

However, "prospects for 2000 depend crucially on sustainability of domestic demand not only through growth in consumption but also an upturn in investment demand," it added.

South Korea leads the recovery among the most severely affected countries with 1999 growth forecast at a stunning nine percent from negative 5.8 percent in 1998. Growth is projected to slow down to 6.5 percent in 2000, the ADB said.

It acknowledged that the crisis had prompted the bank to take a "sober" view of the region's economic prospects. But "events in 1999 have turned out to be far better than expected," it said.

China's economy is forecast to decelerate to 7.2 percent this year from 7.8 percent in 1998 as stimulus from a fiscal package launched last year tapers off and export growth slows down, the bank said. China's GDP is projected to further slow to 6.5 percent in 2000.

"Overall, (China's) 1999 export growth is projected to remain sluggish at three percent. Improvements in industrial production due to falling inventories and export recovery, retail sales and export growth has helped boost import growth which is expected to be 18 percent in 1999," the ADB said.

Asia's newly-industrialized economies -- Hong Kong, South Korea, Singapore and Taiwan -- are expected to grow at an average 5.7 percent this year and 5.2 percent in 2000 from negative 1.6 percent in 1998.

Consumers in these economies "are starting to spend after two years of belt-tightening," the ADB noted.

Hong Kong's economy is expected to expand by 0.7 percent this year, rising to 1.5 percent in 2000 from negative 5.1 percent in 1998.

Singapore is to post 5.0 percent growth this year, climbing to 6.0 percent in 2000 from negative 1.5 percent in 1998.

Southeast Asia, where Indonesia, Malaysia, the Philippines and Thailand were among the hardest hit by the turmoil, is to expand by an average 3.0 percent this year and 4.5 percent in 2000 from negative 7.5 percent in 1998.

Indonesia, which recently held democratic elections but is wracked by threats of separatism, is to grow by 2.0 percent this year and 4.0 percent in 2000 from negative 13.2 percent at the height of the crisis in 1998, the ADB predicted.

Malaysia is to expand 2.0 percent this year and 3.9 percent next year after its economy shrank 7.5 percent in 1998.

Thailand, where the currency meltdown originated in mid-1997, is to reverse negative 10.0 percent growth in 1998 to expand by 4.0 percent this year and 5.0 percent in 2000, the bank said. South Asia is to grow by an average 5.5 percent this year and 6.1 percent next year from 5.7 percent in 1998.

The Pacific island nations are forecast to grow 3.1 percent this year from 0.5 percent in 1998, the ADB said.

ADB growth forecast for SE Asia Economy 1996 1997 1998 1999 2000 SE Asia 7.0 3.9 -7.5 3.0 4.5 Cambodia 7.0 2.0 1.3 5.0 -- Indonesia 7.8 4.9 -13.2 2.0 4.0 Laos 6.9 6.9 4.0 4.0 -- Malaysia 8.6 7.7 -7.5 2.0 3.9 Myanmar 6.4 5.7 5.6 6.6 4.0 Philippines 5.8 5.2 -0.5 3.0 4.5 Thailand 5.5 -1.3 -10.0 4.0 5.0 Vietnam 9.3 8.2 5.8 4.5 5.1 Singapore 6.9 7.8 1.5 5.0 6.0