ASEAN economies expected to expand 4%-4.5% in 2003

ASEAN economies expected to expand 4%-4.5% in 2003

Dow Jones, Manila

Southeast Asian economies are expected to sustain last year's
growth momentum in 2003 despite a sluggish performance in the
second quarter due to the outbreak of SARS.

"We forecast that economic growth would be maintained at an
average rate between 4.0 percent-4.5 percent this year,"
according to the draft of a communique that finance ministers
from the Association of Southeast Asian Nations, or ASEAN, will
issue Thursday.

ASEAN finance ministers are in Manila Wednesday for the start
of their two-day annual meeting to discuss economic and financial
developments in the region. The ASEAN ministers expect the
efforts of individual governments to mitigate the impact on
economies in the region from SARS.

"Our fiscal stimulation through government spending and tax
relief, and accommodating monetary policy should, however, enable
our economies to regain the lost ground during the latter half of
this year," the draft communique said.

It said efforts to establish free-trade arrangements between
ASEAN members and China and Japan should also improve prospects
for the region this year.

Southeast Asian economies expanded 4.4 percent overall in
2002, up from 3 percent in 2001, led by robust private
consumption and investment, and through exports in some countries
and fiscal spending in others.

While growth was sustained in the first quarter of the year
the outbreak of SARS likely slowed the pace.

"Fiscal policy was, and will continue to be, expansionary this
year to sustain the recent revival in domestic demand and to make
up for the loss of economic activities caused by the outbreak of
SARS during the second quarter of this year, while keeping on
track our fiscal consolidation target in the medium term," the
draft communique said.

The draft raised concerns over the slower pace of
restructuring in the financial and corporate sectors last year,
and the consequent impact on financial intermediation in the
region's banking system.

It noted the rise in new nonperforming loans that has
constrained bank lending and delayed the restoration of a strong
financial system.

As part of efforts to boost growth in the region, ASEAN
ministers will push for the establishment of more bilateral
currency swap agreements, and the creation of a regional and
Asian bond market.

A total of 12 bilateral swap agreements worth a combined $31.5
billion have so far been signed; the last was in February between
Japan and Indonesia.

Four more swap arrangements are being negotiated between China
and the Philippines, China and Indonesia, Korea and Indonesia,
and Japan and Singapore.