Asia GDP forecasts cut as U.S. economic beacon dims

Asia GDP forecasts cut as U.S. economic beacon dims

SINGAPORE (Reuters): Economists have pared growth forecasts for Asia as its number one customer, the United States, takes a cyclical downturn after a decade of growth and as demand for electronic goods withers in the post-internet-mania era, Reuters latest quarterly economic survey showed.

With few exceptions, estimates for 2001 were revised down compared with a similar survey three months ago.

The region-wide study of over 120 analysts also showed growth rates are anticipated to be well down on those enjoyed in 2000 when the economic bounce saw gross domestic product in some countries getting back to pre-crisis levels, in terms of the headline numbers at least.

"Economic reports and the direction of GDP forecast revisions highlight that downside uncertainties to the near-term growth outlook remain large," said Bernhard Eschweiler, Asia-Pacific head of economic and market research at JP Morgan.

"Recession in the first half of the year is a serious risk for the United States, Japan, Korea and Taiwan, while a recovery in the second half of the year is only a forecast."

Since the last poll in December it has become increasingly clear U.S. economic growth is slowing and maybe even grinding to a halt. Growth prospects have been pared back pretty much globally as sliding stock markets strip away the wealth effect on not only companies, but individuals as well.

Forecasts for Singapore and Malaysia were pared sharply to 5.3 percent and 5.0 percent respectively with slowing demand for electronic goods curtailing exports and therefore GDP.

Singapore is coming down from the high base of 9.9 percent growth in 2000, with the fourth quarter last year alone showing an 11 percent rise from Q4 1999.

But the curtain was raised on a soft first half of the year at least, with a 9.9 percent drop in January's manufacturing output, signaling coming weakness in the key electronics products sector.

It is a similar picture in Malaysia where a cooling manufacturing sector will limit growth as demand for electronic goods slows further.

In the June/July 2000/01 fiscal year growth forecasts for Australia were revised back quite sharply to just 2.1 percent, well down on the previous year's 4.3 percent and way off the government's 4.0 percent expectation.

Thailand took a hit with growth there this year revised down to 3.5 percent from December's 4.3 percent. Analysts said the jury was still out with regard to Prime Minister Thaksin Shinawatra's new administration.

There was broad-based gloom elsewhere with the 3.8 forecast for Hong Kong not far ahead of the 3.7 percent expected in Indonesia this year.

"We are more negative on the trade picture than before," said HSBC chief economist George Leung, who recently revised his 2001 year-on-year forecast to 2.2 percent from 3.4 percent.

"Originally we thought China would be a strong support to Hong Kong but we revised down our (Hong Kong) export numbers in view of poor demand."

The key reason Hong Kong was likely to see any growth at all this year was because the government plans to spend two percent more of GDP in fiscal 2001/02 than in the current fiscal year. Hong Kong grew 10.5 percent in real terms in 2000.

In South Korea, where electronics account for around 35 percent of exports, growth is now seen at 4.2 percent this year against a previous expectation of 5.0 percent.

Somewhat ironically the upshot of the political problems that made the Philippines such an economic pariah at the end of last year have seen growth expectations for the country improve slightly.

The ousting of Estrada has led to a more stable peso and economic variables like interest rates have settled down.

Analysts are agreed President Gloria Arroyo administration has thus far made the previous administration's efforts look like a bad movie.