Ailing Asia faces prolonged slump after U.S. attacks

Ailing Asia faces prolonged slump after U.S. attacks

SINGAPORE (AFP): Asia's troubled economies, already hammered
by the global slowdown, now face the prospect of a prolonged
slump in the wake of the terrorist attacks in the United States,
economists said Tuesday.

The attacks have slowed world trade to a crawl and for the
export-led Asian economies who depend heavily on the US market,
the prognosis is grim.

Singapore and Taiwan are already in recession, Hong Kong is
dangerously close, and Thailand and Malaysia have barely escaped.

"This is going to worsen the situation. The global economy
will sink as a result," Chia Woon Khien, a regional economist at
Anglo-Dutch bank ING Barings, told AFP.

"What happening on the US is a negative sum game. For Asia,
the impact would be worse. The likelihood is there of a prolonged
recession," she said.

Prior to the attacks, there was cautious optimism the region
could squeeze out a modest recovery in the first half of 2002 but
such hopes have evaporated.

"For the next 100 days when the US economy is in a mourning
period, we think that spending and investment decisions will be
put on hold," said GK Goh brokerage regional economist Song Seng
Wun, who now sees a regional recovery in the latter half of 2002.

The lead-up to Christmas and New Year is traditionally a
crucial period for Asia, particularly for the key electronics
sector.

Economists said the timing could not have been worse for a
region which was hit less than three years ago by the 1997-98
financial crisis.

Unlike that crisis, when the booming US economy was the white
knight for Asia, there is little the region can do this time
round to stem the downturn except to ride it out, economists
said.

Even economic stimulus packages to boost domestic demand would
not make up for the slack in foreign trade, economists said.

"Demand from the US will shrink due to a contraction in
consumer spending and domestic investment in the wake of the
attacks," said Norman Yin, a professor at Taiwan's National
Chengchi University.

In Malaysia, the government is now considering further
stimulus measures on top of the 789 million US dollar
supplementary budget in March and will again slash 2001 growth
forecasts -- now at 5-6 percent -- for the second time next
month.

The Malaysian Institute of Economic Research predicted the
economy will contract in the third quarter and said it would
lower its growth forecast of 2.0 percent this year. But it was
confident there will be no recession.

Hong Kong authorities also admitted the territory will not be
able to escape the fallout.

Financial secretary Antony Leung said "because the American
consumers are still a bit anxious, it would put pressure on the
American economy and thereby the Hong Kong economy."

Thailand, which narrowly avoided a recession in the second
quarter, has cut full year growth forecasts to 1.5-2.0 percent
from 2.0-3.0 percent after the attacks.

Indonesia is however maintaining its growth forecast of 3.5
percent for the year, with the government saying it was too early
to predict the impact of the fallout from the attacks.

In Cambodia, the economic consequences are grim. The country
relies on handouts for economic survival which will total about
620 million dollars for the year to June 2002.

"Foreign aid will fall as will the tourism dollars, and this
country is already on the slippery slope," a Western commercial
banker told AFP.

In Southeast Asia's fastest growing economy Vietnam, the
expected fall in export demand is thought unlikely to spark a
recession, given the low economic base, but it would dent the
authorities' ambitious growth plans.

Even before the attacks, the government's 7.5 percent growth
target for the year was seen as unreachable -- analysts'
projections range between four and 5.5 percent.

China and India are expected to continue growing comfortably
this year but neither of the two giants will be spared from the
aftershocks of the attacks on US soil.

The negative impact of the US crisis on China will be limited
because the government will continue to boost domestic demand,
Great Wall Securities analyst Johnson Liu said of the Chinese
economy.