Asian growth forecasts improve
Asian growth forecasts improve
Ovais Subhani, Reuters, Singapore
Will Asia's vices of last year become its virtues this year?
Economists have raised their growth forecasts for most Asian
countries, figuring that the exposure to the United States which
dragged them down last year will lead them to recovery in 2002,
according to a Reuters survey of more than 100 economists.
But hopes that signs of an economic pick-up in the United
States will translate into a recovery in exports from Asia hang
on the performance of the key U.S. technology sector.
"The main driver and therefore the main risk here is the U.S.
tech outlook," said David Fernandez, head of sovereign research
at J.P. Morgan in Singapore.
That is certainly true for Singapore, where tech exports
accounted for some 46 percent of the island's gross domestic
product in 2000.
The survey shows a significant upgrade of Singapore's growth
outlook to an average of 3.7 percent in 2002 from 1.7 percent
when the same poll was conducted in December.
But it should be outstripped by Korea, which leads the export-
orientated countries in the survey with a forecast of 5.2 percent
growth, up from previous forecast of 4.2 percent and growth of
3.0 percent in 2001.
Korea avoided a recession last year on the back of robust
domestic consumption.
The rosy growth scenarios in the survey are based on a turn in
the U.S corporate profit cycle, which would infuse companies with
the confidence to resume spending on technology.
Still, there is a risk that spending won't come through.
"A meaningful increase in business investment is still a
forecast for the U.S. economy," said Fernandez.
Such investment contracted 13.1 percent in the fourth quarter
of last year, he said. A turnaround to a six percent growth by
the second quarter this year depends on a "considerable
improvement on the profits outlook", he added.
Despite being as open as Singapore, Hong Kong's 2002 growth
outlook received a slight setback in the survey, falling to 1.9
percent from 2.0 percent in the previous poll.
Hong Kong's tech exports accounted for about 42 of its GDP in
2000, but a lackluster domestic economy suffering deflationary
pressures was expected to put a drag on growth.
The debilitating impact of deflation was also forecast to pull
down GDP growth in less export-oriented China to 7.1 percent from
growth of 7.3 percent in 2001.
Analysts said the bearish trajectory of the Japanese yen and
the possibility of a spike in oil prices will remain on radar
screens through the year.
David Simmonds, strategist at Salmon Smith Barney, said the
yen's decline to 130-140 to the dollar was not enough to derail
the Asian recovery. But a slide to levels like 160 or beyond
could have serious consequences.
Similarly, the risk of a rise in oil prices remains a
potential threat to inflation and could hold back business
investment.
"The bigger risk in terms of oil prices is whether at some
point there is an impact through escalation in the military
geopolitical stakes," he said, referring to the Israeli-
Palestinian conflict and the risk of a U.S. attack on Iraq.
2002 Forecast Previous Forecast Actual 2001
Australia 3.8 3.4 1.9
China 7.1 7.2 7.3
Hong Kong 1.9 2.0 0.1
India 5.4 5.2 4.0
Indonesia 3.4 3.3 3.3
Korea 5.2 4.2 3.0
Malaysia 4.0 3.5 0.4
New Zealand 2.7 2.2 3.7*
Philippines 3.6 2.9 3.4
Singapore 3.7 1.7 -2.0
Srilanka 3.7 4.0 -1.3
Taiwan 2.1 1.8 -1.9
Thailand 2.7 2.2 1.8*
*estimated