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.