SEA economies seen to slow down this year

The slowdown in Asia and the Pacific is forecast to be accompanied by rising inflation particularly in Southeast Asia, due mainly to rising oil prices superimposed on weak exchange rates.

According to the United Nations’ 2001 Economic and Social Survey of Asia and the Pacific (Escap), the growth of the gross domestic product (GDP) in the developing economies of the region will decelerate by a moderate one percentage point this year.

Compared to the 1997 crisis, the UN survey indicates that economies are less vulnerable to a slowdown than they were when the region went through the so-called Asian contagion.

According to the survey, Southeast Asia and Northeast Asia are likely to account for much of the slowdown while South and Southwest Asia as well as the Pacific island economies, are likely to maintain and even increase their growth rates in 2001.

Despite the good performance of Escap economies in 2001, the UN survey says near-term prospects are mixed, especially since the region has to contend with the slowdown in the US economy, the biggest single market for several economies in the region.

"A sharp slowdown in the US and any loss of momentum in Japan would inevitably have adverse effects on growth in the region," the UN said. This would be felt directly through lower demand for exports and indirectly through an easing of the prices of both overall commodities and manufactures such as electronics. In Southeast Asia, the UN’s latest available estimate indicates a total GDP growth of 5.9 percent for 2001, accompanied by an average inflation rate of 5.1 percent.

In the Philippines, specifically, 2001 real GDP is estimated to grow by 4.6 percent, the lowest for the whole Southeast Asian region. Inflation, on the other hand, is projected to be at an average 5.3 percent. This is lower than 8.8 percent in Indonesia and highest than Thailand’s 3.7 percent.

The UN said oil prices are the source of risk and uncertainty, since they stabilize at a relatively high level. Any pickup in the global economy, the survey indicates, will generate renewed upward pressure with adverse consequences for inflation and consumer demand in the oil-importing countries.

The UN survey also revealed that three years of budget deficits in the region raised the level of public debt. Likewise, higher recovery-induced imports have narrowed the current account surpluses of several economies, resulting in weaker exchange rates and some increase in investor nervousness.