The ADB projections are contained in the quarterly Asia Economic Monitor (AEM) produced by ADB’s Regional Economic Monitoring Unit (REMU).
"Last year’s growth represented a modest economic rebound from the slowdown in 2001. East Asia weathered the global difficulties reasonably well," Yoshihiro Iwasaki, REMU head, wrote.
"The recent worsening of the external environment will impinge on East Asia’s economic prospects for 2003, causing forecasters to mark down their projections," he added.
East Asian growth exceeded expectations last year, reaching an estimated 6.1 percent, but this is expected to slip slightly to 5.6 percent this year.
A slowdown in the momentum of export growth in the second half of last year, largely reflecting a souring global economic environment, had an indirect effect on the region’s performance, according to the ADB.
The ADB report noted that growth forecasts for the People’s Republic of China, Thailand, and Philippines will remain unchanged at 7.5 percent, 4.1percent, and 3.9 percent, respectively.
"Among Asia’s biggest economies, the most drastic downward revisions of growth for 2003 compared to forecasts issued in October are Singapore (from 4.7 percent to 3.8 percent), Republic of Korea (from 5.6 percent to five percent), Malaysia (from 5.2 percent to 4.7 percent), and Indonesia (from four percent to 3.6 percent).
The ADB report said tensions over Iraq have led to a decline in business and consumer confidence and increases in oil prices. But the impact of any war there would depend on its scale and duration.
"A short military operation could lead to only a temporary spike in oil prices followed by a sharp decline," it said in a statement. "On the other hand, a drawn-out war that inflicts extensive damage to Middle East oil fields would have a more adverse impact on global economic growth and East Asia’s growth prospects."
For the first time since the Asian financial crisis, the stock of real bank credit to the private sector increased in Indonesia and Thailand, suggesting that reforms were starting to bear fruit.
Also for the first time since 1997, net lending by foreign commercial banks to the five affected countries registered a positive level.
But ADB cautions that the deteriorating external environment, weakening growth prospects, and excess capacities across sectors pose major challenges for the region’s policymakers.
"Countries need to respond by closely monitoring the changing economic situation so that they are ready to initiate appropriate policy responses, including cutting interest rates and easing their fiscal stance, to the extent that there is room for maneuver," Iwasaki stressed.