Deutsche Bank predicts Asia sharp acceleration

Deutsche Bank predicts Asia sharp acceleration

Reuters, Singapore

Deutsche Bank's Asian chief economist, Michael Spencer, staked
a claim to having the region's most optimistic growth forecasts
on Tuesday arguing for a sharp acceleration beginning later this
year and extending into 2003.

"U.S. and EU recovery early this year will add to domestic
demand to bring surprisingly strong growth in Asia this year,"
Spencer told a seminar of bankers and investors.

"We have forecasts of 6.5 percent growth in Korea this year,
five percent in Malaysia and 4.5 percent growth in Singapore,"
Spencer said.

The South Korean government expects four percent economic
growth this year, Malaysia is currently forecasting around three
percent and Singapore's official forecast is for between minus
two and plus two percent change in gross domestic product (GDP).

"For half of the countries in the region we have the strongest
forecast on the Street," Spencer said.

Expansionary fiscal policy and looser monetary policy will
continue to support growth in the region in the first half of
2002, Spencer argues, then a pick up in the United States and
Europe will begin to drive demand for Asian exports.

This external demand will in turn add a further boost to
domestic consumption and investment culminating in a very strong
growth outcome next year.

"We expect to see a sharp increase in GDP growth in Asia next
year," Spencer said.

The Deutsche Bank economist dismissed concerns that China's
entry into the World Trade Organization would harm the region.

"Our analysis suggests that most Asian countries will benefit
from China's opening-up, if they allow investment to be dictated
by comparative advantage. India, Indonesia could be the big
losers though," Spencer said.

The biggest risk to the positive outlook for the region was
Japan where any political or economic crisis could change the
outlook mainly through its impact on U.S. and European growth.

Peter Redward, Deutsche Bank's Asian currency strategist
argued for a similar positive view on the outlook for the
region's currencies, especially against the U.S. dollar.

"We expect Asian currencies to outperform the Japanese Yen in
early 2002, strengthening against the U.S. dollar as the year
progresses," he said.

The currencies are all likely to benefit from high levels of
foreign exchange reserves and positive current account balances.

The key risk is a further weakening in the value of the yen
but its impact on Asian currencies depended on the pace of the
fall. Deutsche Bank is currently forecasting a 140 yen to the
dollar rate in 12 months compared with around 131.25 on Tuesday.

"In the short term Yen weakness will continue to pressure
Asian currencies," Redward said.

For the Singapore dollar the Bank is forecasting a rate of
1.74 to the U.S. dollar in 12 months against 1.83 today.