Asia hopes to let good times roll in 2002

Asia hopes to let good times roll in 2002

Jennifer Chen, Reuters, Singapore

Asian economies are set for better times in 2002 after months of plummeting exports left many showing their worst performance in years.

Still, analysts caution against being overly optimistic, saying Asia was not completely out of the woods yet.

Among the lurking sharks that could take a bite out of regional growth were China's emergence as a major economic force, a weaker yen and, above all, the possibility that a U.S. recovery will fall flat on its face.

While analysts polled by Reuters disagree on the impact of the first two factors, most voice the opinion that if the predicted rebound in the United States -- Asia's best consumer -- failed to materialize in the second half of next year, then Asia would have to brace itself for more tough times.

"How fast Asia snaps back really depends on how fast the U.S. snaps back," said Graham Parry, regional economist at Lehman Brothers in Tokyo.

The poll showed the two economies that are most closed -- China and India -- were expected to clock in the most impressive rates of growth in 2002, of 7.2 percent and 5.9 percent respectively.

How open or closed an economy is has emerged as an important factor in determining how well a country steered through the economic storm this year.

But the poll showed there was hope for the region's more open economies, those hit hardest by the global downturn and drop-off in external demand. Taiwan, Singapore and Hong Kong, all of which are seen as facing full-year contractions this year, are expected to be back in the black next year.

Countries that coped better this year with the global downturn were able to draw on the strength of their domestic economies, and analysts say that will remain a theme next year.

Korea, for instance, exceeded expectations despite its reliance on the export-focussed electronics sector because of the strength of its domestic economy. The poll forecast 4.2 percent growth next year.

Still, analysts emphasize that a meaningful recovery in Korea and elsewhere in the region still hinges on how well the United States does next year.

Other candidates seen posing downside risks to Asia's growth are China's entry into the World Trade Organization and the yen's recent rapid fall.

But some analysts say concerns over both factors are exaggerated.

Fears about China arise from the belief that the country, with its cheap labor costs, will rob foreign investment from the rest of Asia while pumping out much cheaper exports.

Deutsche Bank Chief Economist Michael Spencer said in a recent report such concerns bordered on "hysteria".

"Our analysis suggest that while India, Indonesia and the Philippines do stand to lose from China's membership in the global club of trading nations, the cumulative loss in GDP over the next five years will be 50 basis points or less. Other Asian economies will benefit."