ADB upgrades Asian economic growth outlook

ADB upgrades Asian economic growth outlook

Agence France-Presse, Manila

China, South Korea and the Southeast Asian nations are expected to grow 6.1 percent this year and 6.6 percent in 2004, the Asian Development Bank (ADB) said on Thursday, revising upwards an earlier forecast.

The higher-than-expected growth will be built on the back of China's rapid expansion, an improving external environment and strong domestic demand, the ADB said in a quarterly report.

The Manila-based ADB had previously forecast 5.6 percent growth in 2003 and 6.3 percent in 2004 for the East Asian economies.

Three factors are driving the strong growth in East Asian economies, said Pradumna Rana, director of the ADB's Regional Economic Monitoring Unit.

These are "the improved outlook for the United States, Japan and to a lesser extent Europe; the continued strength of domestic demand in a number of East Asian countries and the rapid growth of the Chinese economy, which in turn is driving intra-regional trade."

Composite leading indicators for the major industrial countries point to a strengthening of economic growth in the months ahead, it added.

It said that the external economic environment facing East Asia improved significantly in the third quarter with a global stock market rally fulled by encouraging corporate earnings.

The U.S. economic rebound has strengthened, Japan's recovery is becoming more robust and a gradual turnaround is underway in Europe, the report noted.

"A synchronized upswing in growth is now evident both in the G3 countries and East Asia," Rana said.

The report said stronger consumer spending is a key positive trend in the region, supported by lower interest rates, fiscal stimulus measures, the success in recapitalizing and restructuring financial and corporate sectors, and a switch to consumer lending by financial institutions.

The ADB study found consumer spending accounting for more than one-third of the growth in gross domestic product in Indonesia and the Philippines, and more than half of growth in Thailand in the past 18 months.

"There are also tentative signs that private investment, after remaining subdued for some time, is starting to pick up in the five crisis-affected countries in general and Thailand in particular," said the report.

Along with Thailand, neighbors Indonesia, South Korea, Malaysia and the Philippines were hit by the Asian financial crisis in 1997-98 sparked by a currency meltdown.

The ADB report forecast China's growth in 2003 at 8.5 percent, Indonesia 3.8 percent, South Korea 2.7 percent, Malaysia 4.6 percent, the Philippines 3.7 percent, Singapore 0.8 percent, Thailand 6.0 percent and Vietnam 7.0 percent.

Growth should taper off to 7.9 percent in China next year but rise to 4.4 percent in Indonesia, 5.2 percent in South Korea, 5.4 percent in Malaysia, 4.0 percent in the Philippines, 4.9 percent in Singapore, 6.1 percent in Thailand and 7.4 percent in Vietnam, the ADB said.

It added that China was an increasingly important engine of East Asian growth, with economies in the region benefiting from a sharp third quarter growth rebound in the world's most populous nation after the SARS outbreak.