Asia has seen best of growth upturn

Asia has seen best of growth upturn

Reuters
Singapore

Asia's economic upturn has put down solid roots, with analysts
maintaining forecasts for robust growth in 2004, although
activity is expected to moderate next year, the latest Reuters
poll of the region's economies shows.

High oil prices, the extent of China's slowdown and the impact
of rising U.S. interest rates are the main worries of the region,
as they were in May when the previous poll of over 100 analysts
in 12 economies was conducted.

Despite the concerns, the region seems to be in good shape one
year after emerging from the SARS disease outbreak. Nine of the
12 economies in the latest poll are expected to post stronger
growth this year than last.

All economies apart from South Korea's are expected to grow
faster in 2004 than their average over the past five years.

But only Indonesia is expected to record faster growth in 2005
than in 2004, and foreign investors have slowed, and in some
cases reversed, their investment in the region.

"Already, cracks are appearing: surveys of consumer and
business confidence have weakened in most countries, our
composite leading index of Asian exports has turned down, and
liquidity is evaporating, in line with narrowing balance of
payments surpluses," Rob Subbaraman, regional economist at Lehman
Brothers, said in a report.

Although efforts to rein in the Chinese economy appear to have
taken hold in the past three months, economists still expect
growth of almost nine percent this year, little changed from
2003. Growth is expected to slow to around eight percent next
year.

"In the first half of the year, many administrative measures
were taken to control overheating investment, but these measures
will definitely not last for a long time and will be slowly
diluted," said Qin Jun, an analyst with Guotai Junan Securities.

China has driven much of the growth in intra-regional trade,
so any slowdown in demand would filter through to other Asian
economies. The worries have been heightened by the start of a
series of U.S. interest rate rises, which could hurt U.S.
consumer spending.

"The pace of export growth will be slower in the second half
of 2004 and next year as the United States and other leading
economies appear to have passed their peak," said Lee Dong-su, an
economist at Tong Yang Investment Bank.

"But exports will probably remain healthy and consumer
spending is expected to show a mild recovery gradually in the
first half next year, helping South Korea achieve an economic
growth of above 5 percent," he said.

The weather is reining in India's fast economic growth. Patchy
monsoon rains will leave GDP 6.6 percent higher in the fiscal
year to March 2005, less than previously thought and compared
with 8.2 percent in the previous year, the poll found.

Thailand's growth forecast for 2004 was cut by 0.5 percentage
point to 6.5 percent, and it is no longer expected to be the
fastest-growing economy in Southeast Asia.

That honor now goes to Singapore, after strong first half
growth saw analysts lift their 2004 growth forecast to 7.6
percent. Not only is that the strongest in southeast Asia, but it
is second only to China of the 12 economies covered in the poll.

The largest growth forecast upgrade was in New Zealand.
Analysts lifted their forecast for 2004 growth by half to 4.5
percent, which would be the strongest in over five years, even
ahead of an expected central bank interest rate rise on Thursday.

Despite the persistent worries about high oil prices,
currently trading near us$42 a barrel, inflation forecasts have
not been marked up significantly.

Inflation forecasts for 2004 were unchanged for China, Korea
and Hong Kong from the survey in May. Only two economies --
Indonesia and India -- saw inflation forecasts for this year
increased by more than 0.4 percentage points from the May survey.

As well, inflation in most economies next year is expected to
be about the same or lower than in 2004.

Analysts expect that traded Asian currencies will mostly end
the year stronger than current levels. This would help counter
some inflationary pressure from higher oil costs, although the
region's central banks have shown a reluctance to embrace
currency strength for fear of harming export sectors.

Clothing and footwear prices have been rising in recent months
as a pick up in consumer spending -- something many Asian
economies want -- has allowed retailers to mark up goods.