Asia to grow 5.9% in 2003: Morgan Stanley

Asia to grow 5.9% in 2003: Morgan Stanley

Asia, excluding Japan, will enjoy gross domestic product
growth of 5.9 percent in 2003 from 4.5 percent in 2002 thanks to
an expected pick-up in exports, said Morgan Stanley Asia's Chief
Economist Andy Xie.

The Hong Kong-based Xie said in a recent research note exports
from Asia ex-Japan were expected to rise by 9.8 percent in 2003
from 5.5 percent next year and a decline of 6.9 percent in 2001.

He attributed the rebound in exports to increased investment
in equipment in the United States and Euroland, as well as
increased U.S. consumption.

However Xie cautioned that 2003 would not be a replay of 1999,
when the region rebounded strongly from the 1997-98 financial
crisis thanks to the U.S. technology bubble.

Instead, he expected the region to still be grappling with
falling inflation, and in some cases, deflation, which would
compel regional governments to maintain low interest rates.

"We believe interest rates in the region will remain low in an
environment of weak pricing power, even as GDP accelerates with
trade growth," he said.

He expected short-term rates would likely rise by 20 basis
points in 2002 and 30 basis points in 2003.

Xie said the major risk to Asia's rebound would be a major
devaluation of the yen by the Japanese government to escape the
deflationary spiral in which the country has been caught for
years.

"If Japan were to pursue competitive devaluation, the yen
could retest its lows found during the Asian crisis," he said,
adding another round of devaluation of the regional currencies
would follow. -- Reuters