Super normal growth in Asia ends: Report
Super normal growth in Asia ends: Report
SINGAPORE (AFP): East and Southeast Asian economies will
outperform the rest of the world in 1997 on the back of robust
investments and exports, but their days of "super normal" growth
are over, a report said Thursday.
In its latest quarterly economic review, SocGen-Crosby
Securities Pte. Ltd. also forecast a selective easing of tight
monetary policies in the region which have contributed to a
reduction of overheating concerns.
"We believe recent fears about sustainability of high growth
prospects for East and Southeast Asia have been vastly over-
exaggerated and that, conversely, we expect GDP growth to pick up
across the region in 1997..," the report said.
SocGen-Crosby, an affiliate of French banking group Societe
Generale and Britain's Crosby Securities, forecast gross domestic
product growth of 10.5 percent and 11.0 percent for China in 1997
and 1998, respectively.
It predicted 5.4 percent and 5.8 percent growth for Hong Kong
in the two years, 7.3 percent and 6.8 percent for Singapore and
7.5 percent and 5.4 percent for Malaysia.
The report foresaw 7.6 percent and 7.8 percent growth for
Thailand over the same period, 8.1 percent and 8.3 percent for
Indonesia, and 5.6 percent and 5.8 percent for the Philippines.
The securities house said the region would outperform other
parts of the world economy, but added: "The days of super normal
growth are over -- especially for Southeast Asia -- these
regional economies will generally grow at between seven percent
and eight percent per annum."
The 7-to-8 growth, however, was "entirely satisfactory"
because continued double-digit growth would lead to inflationary
pressures especially as labor markets tighten, it said.
Asia's economic growth slowed in 1996, with exports
considerably lower in almost every case, leading some analysts to
question whether the regional economic miracle was over.
The cyclical decline was partly due to an electronics slump.
SocGen-Crosby said export momentum was poised to pick up, with
the inventory correction having ended and the world economic
environment improving, while investments still remain at "very
high levels" of up to 40 percent of GDP.
"The investment surge over the last few years, in terms of
very high approvals and applications numbers, is now being
translated into actual construction and investment growth in the
real economy..," the report said.
Investments in infrastructure programs are picking up and
"these will have important effects for potential GDP growth."
SocGen-Crosby argued that the appreciation of the U.S. dollar
against the yen over the past 18 months had reached a peak and
would soon be reversed, boosting Asian export competitiveness. It
forecast that the dollar would decline to the 102-to-108 yen
level in 12 months.
Inflationary pressures throughout the region were lower, a
result of tight monetary policies, but continued high investment
implied that "policy would be directed at preventing excess
consumption pressures," the report said.
"This will mean that tight monetary policies will only be
selectively eased," it said.
SocGen-Crosby said East and Southeast Asia were in a period of
adjustment as factors responsible for previous years of very high
growth change, posing the challenge of promoting high value-added
sectors.
"Like in any transition period, there are difficulties as old
sectors decline faster than new sectors develop," the investment
house said.
It cited the example of Thailand, where new capital-intensive
sectors are prospering amid a "precipitous decline" in the export
performance of more labor-intensive industries.
The report also said over-supply was becoming evident in a
number of sectors such as property and retail in Thailand,
Malaysia, Indonesia and to some extent Singapore, while Malaysia
is also faced with over-capacity in manufacturing.