East Asian GDP to rebound: ADB

East Asian GDP to rebound: ADB

Cecil Morella, Agence France-Presse, Manila

Sluggish East Asian economies should improve in the second
half, helped by a short-term easing of fiscal and monetary
policies after the Iraq war and SARS outbreak, Asian Development
Bank (ADB) chief Tadao Chino said Tuesday.

A better outlook for developing East Asia's major trading
partners should also help it post 5.5 percent growth this year,
the head of the Manila-based bank said.

Except for China and Thailand, economic growth in the region
slowed amid global uncertainties in the three months to March.
The Severe Acute Respiratory Syndrome (SARS) epidemic in the
second quarter made it worse, he said in a statement.

Since then, "some key developments including those in recent
weeks give room for optimism that East Asia's growth should pick
up in the second half of this year, and strengthen further next
year."

Chino said "strong actions by governments both in the region
and worldwide" had curbed the SARS outbreak.
If the disease stays under control, "the adverse economic impacts
of SARS should turn out to be moderate reducing growth of
developing Asia by 0.1 to 0.2 percentage points in 2003."

Economic growth in the United States, a key trading partner,
should pick up in the second half amid interest rate cuts, more
robust consumer spending, and strong stock market rallies
worldwide, he said.

There was also improved business sentiment in Japan.

He praised East Asia's "significant progress in implementing
reforms, particularly in addressing weaknesses in the financial
and corporate sectors", leading to lower bad loan ratios and
improved capitalization.

But the first half slowdown "will pull down growth for the
year as a whole. Therefore, East Asia is now forecast to grow by
5.5 percent this year compared with 6.6 percent last year."

Most countries would register lower growth this year -- from
just over 2.0 percent in Singapore, about 4.0 percent in
Indonesia, South Korea, Malaysia, the Philippines and Thailand,
and 7.2 percent in China, he said.

For 2004, "we expect East Asia to achieve an average growth of
6.3 percent. Growth next year should be higher than this year in
almost every country in the region, ranging from about four
percent in Indonesia and the Philippines to 7.5 percent in
(China), with most other countries expected to post growth above
five percent."

But "any increase in geopolitical risks could heighten
uncertainty among consumers and investors," while "the large
imbalances in the industrial economies remain a risk to the
global economy and the region."

Chino said the emerging economic picture in East Asia "calls
for a two-pronged economic policy response at least for some
time: first, monetary and fiscal loosening where there is scope;
and second, expeditious completion of the restructuring and
reform agenda."

He said there was ample room for monetary and fiscal easing
because the region "has excess production capacity in many
sectors, low inflation, a robust balance of payments, and
sizable foreign exchange reserves."

"It is encouraging that, partly in response to the SARS-
induced slowdown in growth, several countries in the region have
recently announced fiscal stimulus packages."

Chino also warned, "Although the worst of the SARS outbreak
appears to be over, countries should remain vigilant and continue
to take preventive measures against its recurrence."