Little prospect for Asia recovery until mid-2002: OECD

Dow Jones, Singapore

There is little prospect of a recovery in most Asian economies until at least the second half of next year, the Organization for Economic Cooperation and Development reported Tuesday.

The OECD, echoing a view expressed by the Asian Development Bank, International Monetary Fund and many private economists, said Asia's recovery is largely dependent on a resumption in global demand for the region's information technology products.

China, which is far less sensitive to the global IT slowdown than the rest of Asia, is expected to continue posting economic growth in excess of 7 percent per year, the OECD said in its semiannual economic outlook.

China's economy has been buoyed by robust domestic demand, the OECD noted.

China may see a slight moderation of growth to 7.2 percent in 2002 from 7.4 percent in 2001, but investor confidence engendered by China's World Trade Organization accession should spur a pickup in growth to 7.7 percent in 2003, according to the report.

China's impressive performance stands in contrast to a group of countries the OECD calls "dynamic Asia," including Hong Kong, South Korea, Taiwan, Singapore, Malaysia and Thailand.

Those countries have suffered a decline in both imports and exports, while capital spending has ground to a standstill and consumption has slowed markedly, the OECD said.

Furthermore, the financial positions of banks and businesses had only partially recovered from the 1997-98 crisis and were fragile when the current downturn began, the report said.

Government spending and debt accumulation have narrowed the scope for further economic stimulus in most of those countries. And equity prices have continued to fall in most of their markets for the past six months.

Nonperforming loans are still high in Indonesia, Thailand and to a lesser extent Malaysia, the OECD said.

Even in Asian countries less exposed to the information technology slowdown, notably Indonesia, Thailand, and the Philippines, economic conditions are expected to be depressed by the broader slump in the global economy and consequent weakening in commodity markets, the OECD said.

Economic growth for the region as a whole is expected to be "modestly positive" in 2001, with Singapore and Taiwan recording recessions, according to the report.