Asia's economies strong despite SARS, Iraq

Asia's economies strong despite SARS, Iraq

Karl Malakunas, Agence France-Presse, Singapore

Asia's economies emerged from the wreckage of SARS and the
Iraq war with surprising strength in 2003, with China's seemingly
inexorable rise expected to fuel an even better regional
performance this year.

Severe Acute Respiratory Syndrome (SARS) had the biggest
impact on Asia's economies in the first half of 2003 after
emerging from the crowded markets of China's southern Guangdong
province the previous November.

The highly infectious virus killed 774 people out of more than
8,000 infections globally, with most of the victims in East Asia,
before being brought under control by June 2003.

At the height of the crisis there were fears the effects of
SARS on many businesses would be equally deadly as regional
travel ground to a near standstill and economies around the
region either shrank or slowed significantly.

The Asian Development Bank estimated SARS cost the Asian
economies as much as US$60 billion, or more than 1.5 percent of
the region's gross domestic product (GDP), with Singapore, Taiwan
and Hong Kong among the worst hit.

The Iraq war, which began when SARS was at is peak, also hit
trade and business sentiment, while the poor performance of the
US economy completed a gloomy hat-trick of negative factors.

Yet the Asian economies proved unexpectedly resilient, thanks
partly to the US economy rallying in the second half of 2003,
China's continued growth and a rapid pick-up in air travel.

In Singapore, for example, GDP shrank 11 percent in the June
2003 quarter on a quarterly basis, then rebounded with a 17
percent expansion for the following three months, its fastest
quarterly increase in eight years.

Hong Kong recorded a similar pattern, downgrading its GDP
forecast for 2003 by half to 1.5 percent as a result of the SARS
crisis, then readjusting it back to 3.0 percent on the back of a
third quarter rebound.

The relentless Chinese economic machine handled the crises
much better than its smaller neighbours and is officially on
target for an 8.5-percent expansion in 2003 compared with average
growth of 7.7 percent for the past five years.

With similar figures forecast for this year, China is expected
to be the driving force behind Asia maintaining its status as
having the fastest economic growth in the world.

The International Monetary Fund said in its World Economic
Outlook in September, 2003 that growth in Asia outside Japan
would be 6.5 percent this year.

"Despite the slowdown since early 2003, the Asia Pacific
countries are again set to be the world's fastest growing region
this year and growth is expected to pick up further next year,"
the IMF said.

Japan's slow escape this year from the quicksands of its long
economic stagnation has also lifted prospects elsewhere in Asia.

However, the world's second biggest economy is still more
subdued than for most of the region, with the latest government
forecasts predicting 2.0 percent growth for the current fiscal
year to March, slowing to 1.8 percent in 2005.

At the other end of the spectrum, Thailand's economy surged on
the back of Prime Minister Thaksin Shinawatra's sometimes
controversial policies, with official GDP forecasts of 6.3
percent in 2003 and 7.0-8.0 in 2004.

Neighbouring Malaysia is expecting 6.0 percent economic
growth, Singapore 3.0-5.0 percent and Indonesia 4.5 percent.

In North Asia, South Korea is also looking forward to putting
the troubles of 2003 behind it with 5.2 growth this year while
Taiwan is also expected to pick up steam with a 5.0 percent
expansion.

India is the relative bright spot in South Asia with the
government forecasting GDP to grow by more than 7.0 percent this
year while the economies of Pakistan and Sri Lanka continue to
suffer from political tensions and internal conflicts.