'Asia set to outperform rest of world in 2003'

'Asia set to outperform rest of world in 2003'

Agence France-Presse, Singapore

Asia is set to outperform the rest of the world in terms of economic growth next year, British-based Standard Chartered Bank said in a report Thursday.

A combination of "the Chinese magnet" and the fact that Asian governments and central banks had wizened up from last year's global slump would pay dividends, although the benefits may not be immediately evident, the bank said.

On an absolute basis, the outlook for the G3 economies remained crucial with modest growth expected in the United States, Europe and Japan, but Asia's "outperformance" in 2002 is likely to continue, it said.

"As uncertainty about the economic outlook diminishes, governments, eying fiscal sustainability, may want to take their foot off the accelerator.

"However, there are indications that Asian governments are rightly still cautious about relying too heavily on external demand."

The report cited Thailand's decision to cut taxes for the poor and push through other plans to spur consumer spending, while the Philippines revised its budget forecasts to allow for a wider deficit.

Asia also enjoyed the benefit of China as a key driver of the region's economic activity, Standard Chartered said, noting the recent Communist Party Congress spoke of quadrupling the size of its economy in the next 18 years.

"While one can question the attainability of this goal... a mere doubling in the size of the Chinese economy would be more than equivalent to adding two more Koreas to the size of the region's economy," it said.

The growth in exports of China for Northeast Asia is increasingly becoming a factor in countering weakness in the G3 markets.

But the report cautioned that while a strong China was in the regional interest, it was not just a source of demand but also an increasingly powerful export engine.

However, while forecasting an improved outlook for 2003, the bank said the full benefits of increased economic activity are unlikely to be felt by companies or individuals.

"The world is still suffering from significant excess capacity such that companies will continue to have limited pricing power," the report said.

"Meanwhile, the resultant focus on productivity increases means that the regions's labor markets are still vulnerable, which may somewhat dampen consumer sentiment."

Of the major Asian economies, the report estimated economic growth for 2003 in China at 7.4 percent, ahead of Malaysia (6.0 percent), South Korea (5.6 percent), India (5.5 percent), Singapore (5.2 percent), with Hong Kong and Indonesia both at 3.5 percent.

By comparison, U.S. growth was put at 3.0 percent, ahead of Japan at 2.2 percent and Europe on an even 1.0 percent.