Asia to grow 5.5 percent in next five years, short-term risks seen
Asia to grow 5.5 percent in next five years, short-term risks seen
Agence France-Presse, Singapore
Asia-Pacific economies are expected to grow faster than other
regions in the next five years but expansion could be disrupted
in the short term by several risks including a U.S. slowdown and
a resurgence of the SARS epidemic, a report said on Monday.
In its latest projections, the Economist Intelligence Unit
(EIU) predicted that gross domestic product (GDP) in the Asia-
Australia region excluding Japan will enjoy the fastest average
annual expansion rate of 5.5 percent in 2003-2007 compared with
other areas.
But the performance will be a shadow of the growth experienced
before the 1997-1998 Asian financial crisis, the EIU said.
In the near term, the projected improvement in the region's
performance is due to the brighter outlook for the global
economy, particularly that of the U.S. which is a major market
for Asia's export-dependent economies, it said.
However, a number of risks threaten to halt Asia's upward
momentum, the EIU said.
These include a resurgence of the Severe Acute Respiratory
Syndrome (SARS) epidemic, a slowdown in U.S. consumer spending
and continued sluggishness in Organisation for Economic
Cooperation and Development (OECD) members, it said.
"World economic performance has improved in recent weeks...
nevertheless, there remain serious problems in some of the
world's largest economies, and our upgraded forecasts still
suggest that the OECD will take until late 2004 to reach even a
trend pace of growth," the EIU said.
"Emerging Asia is particularly likely to be affected by these
trends. Sales into the OECD are rising only slowly and many
countries are relying instead on exports to China and efforts to
boost domestic demand," it said.
The EIU also warned a resurgence of SARS, which struck mainly
East Asia and claimed more than 800 lives globally, cannot be
ruled out.
SARS dealt a devastating blow to the regional economies
particularly in the June quarter as travelers delayed or
canceled trips to Asia, which cost the lucrative airlines,
conventions and hotels sector billions of dollars in lost
revenues.
At the same time, the region is still feeling the after-
effects of reforms implemented after the 1997-1998 crisis, the
report said.
"The financial and corporate sector restructuring initiated
after the crisis is still affecting economic performance in many
countries," it said.
"In addition, OECD import demand growth will remain far slower
than during the bubble years of the 1990s, acting as a drag on
Asia's highly export-dependent economies," the EIU said.
The 10-member Association of Southeast Asian Nations (ASEAN)
grouping, still struggling to regain its lost glory since being
hit badly by the regional financial crisis, is likely to grow by
an average of 3.9 percent in 2003 and 4.9 percent in the
following year, it said.
Much of ASEAN's growth will be driven by the strong
performances of China and India, the region's second and third
largest economies after Japan, the EIU said.
"This is very different from the mid-1990s, when Asia's
performance was linked to rapid growth across much of the
region," it said.
Real gross domestic product (GDP) growth in China is projected
to average an "extremely fast" eight percent in 2003 despite the
SARS epidemic, the EIU said.
"Export growth is impressive despite the weakness of world
demand, but investment is now driving the economy forward," it
said.
Hong Kong, also struck by the SARS outbreak, will struggle
economically until 2004, the EIU said.
"Domestic demand is recovering strongly from the SARS crisis,
but the impact on the economy in the first-half of 2003 was so
severe that we expect average GDP growth for year to be just 1.1
percent," it said.
Malaysia and Singapore, whose economies are heavily dependent
on global conditions, will track trends in world trade.
"Weak U.S. demand, combined with the negative implications of
the SARS outbreak (particularly in Singapore), held growth back
in the first-half of 2003, and only a modest recovery is expected
in the months ahead," it said.
Singapore is expected to grow 1.1 percent in 2003 and Malaysia
3.9 percent.
Fellow ASEAN country Thailand will likely expand 4.7 percent
this year, Indonesia to grow 3.6 percent and the Philippines
economy is to post a four percent expansion.