Pacific Rim growth poised to recover

Pacific Rim growth poised to recover

SINGAPORE (AFP): Most Pacific Rim economies are poised for a
sustainable economic recovery marked by low inflation in the next
two years after growth slowed in 1996, a leading regional think-
tank said here yesterday.

The Pacific Economic Cooperation Council (PECC), which groups
Asian, North and Latin American economies and Russia, forecast
average gross domestic product (GDP) growth of 4.1 percent in the
next two years for its members.

While only slightly higher than the 4.0 percent figure for
1996, "the best way to describe such an outcome would be as a
high and sustainable plateau," the PECC's annual Pacific Economic
Outlook report said.

It rejected fears of long-term economic decline in South Korea
or financial collapse in some other countries, and highlighted
the sharp drop in inflation to an average of 4.1 percent last
year, less than half the 8.6 percent in 1995.

Chen Kang, a forecaster with Singapore's Nanyang Technological
University, told a news conference at the release of the PECC
report that there was a consensus that "the world is entering a
new era, especially from 1997 on, with high growth and also very
low inflation."

The electronics slump that hit Asian economies in 1996 "is not
forecast to be repeated in 1997 or 1998," said the Singapore-
based PECC, a non-government body that includes officials,
academics and business representatives from its member-economies.

Twelve of the 20 economies surveyed annually by the PECC
suffered slower growth in 1996, but this year the same number are
expected to enjoy faster expansion, "which indicates that
prosperity will be more widely shared."

Excluding Russia, which is expected to improve but remain in
negative territory, average regional growth was set at 4.3
percent in 1997 and 1998.

Japan would see slower 1.7 percent growth this year from 3.4
percent in 1996, but strong performances are expected from the
United States, whose GDP would grow 3.2 percent from 2.4 percent
in 1996, and other economies.

Top performers this year will be China with 9.8 percent
growth, Vietnam with 9.6 percent, Malaysia with 8.2 percent,
Singapore with 7.5 percent, Indonesia with 7.3 percent, Taiwan
with 6.4 percent, and the Philippines with 6.0 percent, the PECC
said.

The report, prepared before the recent Thai financial crisis,
predicted 7. 1 percent growth for Thailand this year, higher than
more current forecasts.

"China remains by far the world's number one destination for
foreign direct investment (FDI)," the report said, predicting
actual inflow of FDI into China at US$40 billion in 1997, with
Chinese foreign currency reserves reaching up to $150 billion by
the end of this year.

The PECC said Hong Kong, which reverts to Chinese rule on July
1, would see 5.1 percent growth this year and 5.2 percent in 1998
from 4.7 percent in 1996 after the "shadow of political
uncertainty" ahead of the handover had "evaporated."

Russia would experience an economic contraction of 3.0
percent, but this would be an improvement on last year's economic
shrinkage of 6.0 percent.

Latin American countries under the PECC face a mixed outlook,
with Mexico forecast to grow 5.0 percent from 5.1 percent last
year. Chile's growth would fall to 5.6 percent from 7.2 percent
in 1996.

The good inflation performance in PECC countries last year
"was not a fluke, but rather signals a new era of price
stability," the report said.

Average inflation in PECC economies was predicted to fall to
3.9 percent this year and 3.5 percent in 1998, partly due to
"more benign markets for food and energy."

"A combination of higher real output and sharply lower
inflation is the stuff of dreams for policymakers, and they can
feel justly proud of their achievements -- even if most economic
outcomes are beyond their control," the report said.