Asia remains fastest growing area: ADB

Asia remains fastest growing area: ADB

Associated Press, Manila, Philippines

Asia will remain the world's fastest growing area this year despite the adverse effects of SARS and the war in Iraq, with growth likely to accelerate in 2004 as global demand recovers, the Asian Development Bank said on Tuesday.

Asia, excluding Japan, will grow 5.3 percent this year, the ADB said, sticking to its April forecast despite the SARS epidemic then hitting the region. That's a slowdown from the region's 5.6 percent growth in 2002, but the bank expects growth to pick up to 6.1 percent in 2004, better than its April forecast of 5.9 percent.

This year's relatively strong outlook "is all the more remarkable" given the weak first half of 2003 in major industrial countries, including the United States and euro zone nations, the ADB said in the semiannual update of its Asian Development Outlook.

Severe acute respiratory syndrome, which killed more than 900 people of the 8,400 sickened worldwide, dealt the severest damage to the region's economy in 2003, the ADB said.

Nonetheless, the Manila-based lender raised its forecasts for China and Hong Kong - epicenters of the flu-like virus - as well its forecasts for Thailand and Central Asia.

But the ADB cut its outlooks for Singapore, also battered by SARS, and South Korea, which has had to contend with the fallout of a consumer-credit crunch, nationwide strikes and a devastating typhoon.

SARS cut regional demand and business revenue nearly US$60 billion, while governments spent a staggering 18 billion - $2 million per person infected - containing the outbreak, the ADB said. The biggest loss was in tourism and retail.

"Fortunately, most governments involved saw the need for determined action to bring SARS under control fast - and they were largely successful," the bank said.

While the bank doesn't discount the possibility of a SARS recurrence, it said the impact should be milder because governments are now better equipped to deal with such epidemics and travel-monitoring mechanisms remain in place.

The theme of the first half of 2003 was the continued, rapidly increasing importance of China as a driver of regional trade and growth and the substantial accumulation of foreign-exchange reserves by various countries, the ADB said.

China has emerged over the past two years as a major export market for other countries in Asia, and this trend accelerated in the first half of 2003.

"If these trends continue and regional economies continue to focus on policies to achieve faster growth in domestic demand, Asia's economic outlook should become less dependent on economic developments in the major industrial countries," the ADB said.

Despite SARS, China's strong foreign investment inflows and soaring exports will help the economy grow 7.8 percent this year, slightly down from last year's 8.0 percent, the ADB said, but better than the bank's April forecast of 7.3 percent. It raised China's 2004 outlook to 7.9 percent from 7.6 percent.

Similarly, despite falling into a recession in the first half, Hong Kong's economy will likely expand 2.1 percent this year, the ADB said, shading up its earlier forecast of 2 percent growth and predicting the city's economy will accelerate to 4.8 percent next year, an upgrade from April's forecast of 4 percent growth.

Aside from a recurrence of SARS, the bank said other risks to Asia's growth are the lingering threat of terrorism and the continued uncertainty in global recovery.