Southeast Asia is forecast to grow by 3.9 percent this year and up to 4.9 percent next year after it succeeded in containing the dreaded Severe Acute Respiratory Syndrome (SARS) and other global disruptions.
Part of growth optimism is the fast pace of trade with China which the ADB called "the key to regional growth."
East Asia, bannered by PRC, is expected to grow by 5.6 percent this year and by 6.5 percent in 2004.
ADB chief economist Afzal Ali said in a briefing that the positive growth in Asia "reflects a stronger performance of the PRC economy as well as significant improvements in Hong Kong, Singapore and Thailand.
In the past two years, the PRC has become a major growth engine for intra-regional trade. Ali outlined that exports from East, Southeast and South Asia to PRC grew by startling rates in the first half.
"In fact, the PRC has already overtaken the United States as the main export market for some East Asian economies, such as Korea," Ali said. "If these trend persists and developing Asia continues to focus on policies to achieve faster growth in domestic demand, Asia’s economic outlook would, over time, become less vulnerable to economic swings in industrial countries."
The major concern of the ADB is the continued fiscal deficit problems of several Asian countries that has resulted in the respective government’s competing with their respective private sector for funds.
"Financial sector restructuring, particularly banking reforms, is still a work-in-progress that adversely affects lending to business. Various infrastructure, institutional, legal and policy constraints still weigh heavily on the investment climate in most countries of the Asia Pacific region," the ADB chief economist said.
In the PRC, strong investment growth more than offset the impact of SARS on consumption. Its economy remained the leading performer in the sub-region, with on 8.2 percent GDP growth in the first half of 2003.
The PRC’s exports surged by 34 percent in the first half of 2003 and imports rose by 44.5 percent over the same period, providing considerable momentum for export expansion in other East Asian economies, as well as in Southeast Asia.
Meanwhile, Southeast Asia’s growth prospects are set to improve from 3.9 percent this year to 4.9 percent in 2004.
The subregion’s top performers during the first half of 2003 were Cambodia, Lao People’s Democratic Republic (Lao PDR), Thailand, and Vietnam.
The Philippines, however, saw a contraction in the first quarter and flat growth in the second. Singapore, meanwhile, experienced a severe contraction in the second quarter, mainly as a result of the SARS outbreak.
Thailand is the only country for which growth forecast has been upgraded significantly – from five percent to six percent. Its growth prospects, though, will depend on external developments, as exports are a major driving force.
Vietnam is expected to show the strongest growth at around seven percent for both this year and next, as it maintains its expansionary fiscal policy to meet the costs of ongoing and planned reform and additional infrastructure projects.
Elsewhere in the sub-region, prospects also look marginally better in 2004 than were projected in April, with growth expected to range from four percent (Indonesia) to 5.5 percent (Cambodia).