Asia to take

Asia to take hit amid Global fallout

Reuters Washington

Emerging economies in Asia, except for China and India, will be hit hard by the global slowdown and the potential economic fallout of the Sept. 11 attacks on the United States, according to the International Monetary Fund's World Economic Outlook released on Wednesday.

The Washington-based lender said the global slowdown, especially in the high-technology sector, coupled with higher oil prices, political uncertainty in some countries and weakening confidence will hit newly industrialized economies such as Taiwan and Singapore.

While the overall economy of emerging Asia, which includes India, China, Hong Kong and Korea, is forecast by the IMF to grow at 5.1 percent this year and 5.9 percent in 2002, many Asian countries will suffer significant slowdowns.

Singapore's economy, which grew by 9.9 percent last year, will contract 0.2 percent this year and should grow 4 percent in 2002. Taiwan's economy will also shrink 1 percent this year after having grown at 6 percent in 2000, said the fund.

Indonesia, where market sentiment has improved after the peaceful resolution to its political crisis, will see its economy grow 3 percent this year and 4.3 percent in 2002. But challenges such as decentralization and containing inflation remained, the fund said.

While advanced economies on average should grow 1.3 percent this year, Japan, once one of the world's strongest economies, should see its output contract by 0.5 percent in 2001, the fourth recession in a decade, according to the fund.

The country should see a slight recovery to growth of 0.2 percent next year, the IMF said.

Growth in Asia was forecast to pick up in 2002, as is global economic activity, and the fund said it was encouraged that direct foreign investment in Asia held up.

However, the IMF cautioned that these projections were made before the attacks that rocked the United States on Sept. 11 and which are likely to shake the global economy in the weeks and months ahead.

In the wake of the attacks, there exist major risks such as a prolonged slowdown in America, a delayed recovery in the technology sector and a bleak future for Japan, the fund said.

Most Asian countries, however, were said by the IMF to be better prepared than previously to weather such risks because economic fundamentals have improved since the 1997 Asian crisis, such as large current account surpluses and flexible exchange rates.