Asia growth stronger despite US woes — ADB

East Asian economies will grow more strongly this year than was earlier forecast despite worries over the strength of the recovery in the US, the Asian Development Bank (ADB) said yesterday.

The Manila-based multilateral institution said in a quarterly report that a surge in exports should help gross domestic product of the Association of South East Asian Nations (ASEAN), China and South Korea grow an average of 5.8 percent in 2002.

This compared to a forecast of 5.2 percent made in April.

Reuters polls conducted last week also showed that economists in the region expect Asian economies to grow faster in 2002 than had been forecast earlier.

According to the ADB, China is expected to grow 7.4 percent in 2020 against the earlier forecast of 7.3 percent, Korea 6.1 percent against 4.7 percent, Singapore 4.2 percent against 3.8 percent, Malaysia 4.1 percent against 3.6 percent and Thailand 3.7 percent against 2.8 percent. Indonesia’s growth is likely to be 3.4 percent this year, the same as the previous forecast, while the Philippines should grow 3.8 percent against the earlier estimate of 3.6 percent, it said.

"Resurgence in growth is driven primarily by a rise in global demand for the region’s exports, although domestic demand has played a complementary role," the ADB’s Regional Economic Monitoring Unit said in the report. "In recent months, most countries have seen a significant turnaround in exports."

ASEAN comprises Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. The ADB average growth forecasts did not include Brunei and Myanmar.

The main market for the region’s exports is the US and the ADB said concerns over the economic recovery there and the weaker dollar were not yet of serious proportions.

"With the recent slide in the US stock market, the May decline in retail sales and the softening of consumer sentiment in June, risks to the US recovery may have increased," the report said.

"Yet, so far, those risks appear to be manageable and are unlikely to derail a moderate US recovery this year. However, if this (stock market decline) continues and deepens during the rest of the year, it could upset the current assessment."

Economists have also fretted about the weakening of the US dollar affecting Asian exports, but the ADB said: "So far, the depreciation has been slow and orderly and, if anything, somewhat supportive of the US recovery."

But it added that a crisis of confidence in US corporations, if it were to occur, could lead to capital flight and a sharp fall in the value of the dollar.

Domestically, regional economies were much stronger, the bank said.

"With the maintenance of political stability and improvements in prudential indicators in most countries of the region, domestic risks to East Asia’s current economic rebound appear to be receding somewhat," it said.

Significant strides

East Asian economies grew at an average 2.7 percent yearly over the past five years, significantly lower than the eight-percent growth achieved from 1987 to 1997, according to the ADB.

The July issue of the Asia Economic Monitor (AEM), a quarterly report produced by ADB’s Regional Economic Monitoring Unit (REMU), said the East Asian region has taken significant strides in macroeconomic management, financial and corporate sector restructuring. It added that the national level interventions were complemented by regional monetary and financial cooperation.

REMU head Yoshihiro Iwasaki in his report said that the economies of the region have been making headway in dealing with the crisis which resulted in transforming the economic and financial landscape, making the region more responsive to market forces while at the same time enhancing resilience to external shocks.

"Overall, they are laying the foundation for sustained long-term growth," Iwasaki added.– Ted Torres