Asia looks to region for growth in 2001

Asia looks to region for growth in 2001

HONG KONG (AFP): Asian economies will have to look to regional and domestic demand for growth in 2001 as the U.S. economy slows down, a bank report said on Friday.

Credit Suisse First Boston said a continuing rise in United States electronic inventories and the country's slowing economy would lead to a sharp deceleration in Asian exports there in 2001.

But continued growth in domestic demand, especially amongst South East Asian countries, China and India, and cheap Asian currencies would support stronger intra-regional exports, the report said.

The bank expects the Asia's economic growth to dip 0.8 percentage points to 6.6 percent this year.

"We look for a 150 basic points cut in the U.S. federal funds rate this year," said Dong Tao, senior regional economist of Credit Suisse First Boston.

"That will help Asia in general, particularly Hong Kong," he added.

The U.S. Federal Reserve on Wednesday surprised markets by cutting the key federal funds interest rate by half a percentage point to 6.0 percent in the first cut for two years.

"Meanwhile, the U.S. slowdown is faster than we previously thought. Asia can survive on U.S. growth as low as 2.0 percent, but a harder landing scenario would present a difficult situation for the region," said Tao.

The report also said that China would be one of the least affected Asian countries in a global slowdown, a trough in the electronics cycle or high oil prices.

Private consumption boosted by salary hikes and robust stock markets should be helpful in allowing China to weather external adversity.

The bank has an economic growth forecast of 7.8 percent for China in 2001.

"Year 2002 will be a real banner year for China and we estimate GDP (gross domestic product) growth of 9.5 percent," Tao said.

This would be based on stronger exports backed by newly-built electronics production capacity, further rises in private consumption in an inflationary environment, rapid expansion of the service sector and World Trade Organization-related foreign direct investment.