Asia's trade balloon begins to deflate: Survey

Asia's trade balloon begins to deflate: Survey

SINGAPORE (Reuters): The outlook for trade in Asia is slightly less rosy according to the latest quarterly Reuters survey of 119 independent economists, which covered Asia outside Japan.

The post-crisis surge back to big trade surpluses as imports collapsed and currency depreciations made exports highly competitive has run its course, and for many countries the trade position is seen deteriorating slightly.

South Korea's trade surplus is seen contracting to US$12.6 billion this year, compared with a forecast for a $14.74 billion surplus in a similar poll carried out in December.

The Korean authorities are battling to keep the rising won in check for the sake of export competitiveness.

"It is not desirable that the won is rising, tracking the yen's rise against the dollar," said a Korean Finance Ministry statement. "The government is closely watching the movement of the exchange rate and is ready to take necessary action."

Most economists forecast China's trade surplus would narrow this year and next as surging imports continued to offset recovering exports.

Some predicted imports would grow faster than exports after China's entry into the World Trade Organization (WTO) because cuts in tariffs would make some goods cheaper.

The poll forecast a surplus of $27.0 billion this year compared with the previous forecast for a $28.35 billion outcome.

In Hong Kong a deficit of $9.9 billion is expected this year, an upward revision from the $8.5 billion shortfall projected in the last poll.

Economists said higher U.S. interest rates might prompt an economic slowdown and that would hit import demand from Asia.

"Our exports in general will hold up very well in the first quarter while in the second quarter it will slow down a bit," said Standard Chartered Bank economist Tracy Yu.

It was a similar picture in Indonesia and Thailand where forecasts for the trade surpluses were revised down slightly to $22.2 billion and $6.3 billion respectively.

The Philippines' surplus is forecast to expand to $4.54 billion this year, up from the previous forecast of $3.2 billion.

"The ongoing growth in exports has been fueled by the expansion in the electronics sector. The Philippines does remain an attractive site for international electronics manufacturers," said David Cohen, an economist at S&P MMS in Singapore.

Weak consumer demand and business activity, manifested in the effort of the government to pump prime the economy, would keep imports in check in 2000.

Economists see an $8.8 billion surplus in Taiwan this year, up from $7.8 billion in the earlier survey, but the outlook is for a shrinking surplus.

"The strong recovery will boost domestic demand, prompting rising imports that will result in a smaller trade surplus," said Core Pacific Securities economist Christine Wu.

Taiwan's expected accession to the WTO in the second half of 2000 will further diminish the surplus.

"Entering the WTO will mean further tariff cuts and opening our market to foreign products," said Hotung Securities research vice president Albert Lin.

"Imports will rise faster than exports and a dwindling trade surplus is inevitable."