Asia-Pacific economies to grow faster: PECC

Asia-Pacific economies to grow faster: PECC

SINGAPORE (AFP): Asia-Pacific economies will grow faster this year and next on the back of increased trade and investment after a soft landing in 1995, the Pacific Economic Cooperation Council (PECC) said yesterday.

"We expect to see faster growth in 1996 and 1997 and inflation to further decrease," P. C. Leung, director-general of the council, said after releasing the eighth annual Pacific Economic Outlook report here.

The council forecast average growth rates of 3.9 percent and 4.2 percent respectively in 1996 and 1997 for 20 economies, up from 3.5 percent in 1995.

It predicted inflation would fall sharply from 8.6 percent in 1995 to 4.8 percent in 1996, but warned that uncertainty over oil prices and grain inventories could limit the improvement.

Inflation problems still exist in several economies including China, Colombia, Indonesia, Mexico, Peru, Russia and Vietnam as well as Hong Kong, it said.

Balance of payments was tipped to improve, with sizable reductions in the U.S. current account deficit and the Japanese surplus that the report said would improve stability in the yen- dollar exchange rate and ease trade tensions.

The report analyzed the economies of Australia, Canada, Chile, China, Colombia, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Mexico, New Zealand, Peru, the Philippines, Singapore, Taiwan, Thailand, the United States, Vietnam and, for the first time, Russia.

Excluding the United States and Japan, the growth forecast jumps to 5.5 percent and 5.7 percent, said PECC, a forum of business and government representatives and academics.

The report said expansion of private investment, rapid growth of international trade and implementation of economic reforms were spurring the economic recovery in the Pacific Rim region.

Private investment is forecast to be a leading sector in most economies in 1996-1997 and is particularly important in China, South Korea, Peru, the Philippines, Vietnam, Canada, Japan and the United States.

"International trade is regaining its strategic role, and for the region as a whole trade volumes are growing at more than twice the rate of GDP (Gross Domestic Product)," PECC said.

Economies such as New Zealand, the Philippines and Vietnam had benefited from policy reform.

But PECC voiced concern over difficulties in completing reforms which, it said, were "most evident in China, where reform of state-owned enterprises has hardly begun," threatening Beijing's fiscal position and price stability.

Further reform

"Further reforms are also critical for Indonesia, (South) Korea, Mexico, the Philippines, Russia and Vietnam," it said. "While difficult to accomplish, comprehensive market-oriented reforms do promote growth."

The report painted a mixed outlook for the United States, Japan and China.

For the United States, it forecast economic growth of 1.7 percent and 2.3 percent in 1996 and 1997, for Japan 2.4 percent and 2.6 percent and for China nine percent and 8.5 percent.

If the U.S. economy were to perform even slightly better than forecast, it would substantially push up region-wide growth, said academic Toh Mun Heng, Singapore representative in the forecast panel.

He said all signals pointed to a "real possibility" of the Japanese economy recovering, "not feebly as in the past."

Toh said the Association of Southeast Asian Nations (ASEAN) -- grouping Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam -- were capable of sustained annual growth of six-to-eight percent in the coming five years.

And the momentum of China's current expansion is such that it can grow seven-to-nine percent annually for the next five years, Toh said.