Domestic demand seen as Asia's buffer

Domestic demand seen as Asia's buffer

Asian economies that turned to domestic sectors for growth achieved impressive results in 2002 amid faltering global demand and trade slows, a study said on Monday.

"Against projections of 3.5 per cent at the start of the year, Thailand is now expected to post growth of close to 5 per cent" for last year, said the report by UOB (United Overseas Bank) Treasury Research.

South Korea is expected to register 6 per cent growth versus expectations of 5 per cent last year, it noted. Malaysia and the Philippines are likely to end 2002 with 4 per cent growth, followed by Indonesia at 3.3 per cent. Asian economies have been looking at alternative sources of economic growth to compensate for the increasing volatility on the global economic front, the report said.

South Korea, Thailand and Malaysia "have turned to their domestic sector, through aggressive marketing of credit cards and retail loans," UOB Treasury said.

With most of these countries recently introducing regulatory curbs on credit, they still have to depend on better investment spending to fuel economic growth, it added.

"Although Taiwan is expected to clock growth of 3 per cent last year, it is largely a result of a low base effect from the contraction of 1.9 per cent in 2001," the study said.

Hong Kong remains in the doldrums, although spillover from China is benefitting the economy somewhat, it added.

Export-driven Singapore managed to avoid a second recession in two years with the economy growing 2.2 per cent, expanding by 0.1 per cent in the fourth quarter from the third.

The report cited intra-regional trade as a factor which could keep the region going despite the global uncertainties. China was now South Korea and Taiwan's top export destination after the United States, it said.

"The question is whether China will be an alternative growth engine for the world," UOB Treasury said, expressing doubt.

"Although there have been increasing intra-regional trade (especially in exports to China), a significant proportion is still intermediate goods which are eventually imported to industrialised countries," the study said. -- dpa