Bank Negara predicts slight pickup in ASEAN growth
Bank Negara predicts slight pickup in ASEAN growth
KUALA LUMPUR (AFP): Members of the Association of Southeast Asian Nations (ASEAN) will enjoy slightly higher average economic growth of 7. 3 percent in 1997, but their collective current account deficit will worsen, Malaysia's central bank forecast over the weekend.
Bank Negara also warned that ASEAN and Newly Industrializing Economies (NIEs) both faced problems in sustaining growth, maintaining competitiveness and fighting asset inflation.
In its annual report, Bank Negara said five of the seven ASEAN economies averaged 7.2 percent gross domestic product growth in 1996, slowing from 8.0 percent in 1995 as exports slackened.
ASEAN groups Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.
Bank Negara excluded tiny Brunei, for which no data were available, and classified Singapore among the NIEs, along with South Korea, Taiwan and Hong Kong, which averaged 6.0 percent growth last year.
"For 1997, output growth in the Asian NIEs and ASEAN countries is expected to be sustained at 6.1 percent and 7.3 percent respectively, with a recovery in export growth and stronger domestic demand, particularly investment expenditure," Bank Negara said.
Bank Negara predicted 8.0 percent output growth for Malaysia, 6.8 percent for Thailand, 7.8 percent for Indonesia, 6.0 percent for the Philippines and 9.5 percent for Vietnam this year.
It forecast 7.0 percent growth for Singapore, 5.0 percent for Hong Kong, and 6.2 percent each for Taiwan and South Korea.
However, the report cited "downside" risks such as labor unrest in South Korea and Thailand's vulnerability to its banking sector's heavy exposure to the property sector and speculative pressure on the US$4.9 billion last year, mainly due to higher capital imports by Indonesia, Malaysia, the Philippines and Vietnam.
Thailand's deficit was expected to narrow slightly to $14.8 billion from $15.0 billion in 1996 due to a recovery in export growth and subdued increases in imports.
The Asian NIEs were forecast to end 1997 with a current account surplus of $5.8 billion from a deficit of $0.8 billion in 1996 as their exports pick up.
The report warned that the economic slowdown of last year was not solely due to a cyclical weakness in global demand for semiconductors, and called for structural reforms.
"It became apparent that countries in the region were also losing their traditional comparative advantage of low labor costs due to rising wages in a tight labor market situation," the central bank said.
In some countries, rising production costs were aggravated by asset price inflation, inefficient public utilities and poor transportation and infrastructure, Bank Negara said.
Regional economies are confronted with competition from emerging low-cost production centers in other parts of Asia, such as India and Cambodia, as well as eastern Europe which are vying for a bigger share of foreign investments.
"As the next millennium approaches, the main challenge facing the regional economies is the ability to sustain economic growth and maintain international competitiveness," Bank Negara said.
The report predicted that average inflation in the five ASEAN economies would moderate to 5.4 percent in 1997 from 6.1 percent last year with food prices expected to rise more slowly due to good harvests.
But the NIEs would see consumer prices rising at a faster rate of 4.4 percent, up from 4.2 percent in 1996, in response to stronger domestic demand, it said.