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Monday, 19 March, 2001, 15:29 GMT
Growth to slow in Asia
A woman walks past a shopping centre in Kuala Lumpur where a big SALE sign is displayed.
In Malaysia, the government hopes that a one month sale in all shops will help curb inflation.
Economic growth will slow dramatically in several East Asian economies as a direct consequence of the weakness in the US, their most important export market, the Asian Development Bank (ADB) warned on Monday.

Average growth in South East Asia:
1999: 6.9%
2000: 7.1%
2001: 4% (projected)

Source: ADB
"External risks have heightened because of the faster than expected slowdown in the US and global economies," according to the ADB, which is part of the World Bank Group.

Growth will slow in:
Indonesia
Philippines
South Korea
Malaysia
Thailand

Source: ADB
Five countries will be hit, the Bank predicted in its bi-annual report on the region's recovery from the financial crisis that hit during 1997: Indonesia, Philippines, South Korea, Malaysia and Thailand.

"The average growth rate for the affected countries is expected to slow to 4% from an estimated 7.1% in 2000," the Bank said.

Electronic slump

The Bank also warned of a sharp fall in demand for electronic goods.

A man walks past an unfinished building in Thailand.
In Thailand, hundreds of unfinished buildings bear testimony to the last economic crisis.
Asia supplies 40% of the world's electronics markets, and strong demand for these goods helped lift the region's troubled economies out of the last economic crisis.

Last year, demand for electronic goods rose 83%. This year it is predicted to fall by 9.5%, the Bank reported.

"What this basically means is that the external shocks could be higher," said ADB economist Pradumna Rana.

"People might underestimate how much Asia, [not including] Japan, could suffer from a global slowdown," agreed Rob Subbaraman of Lehman Brothers in Tokyo.

Japan worries

The economic crisis in Japan is making matters worse for East Asia as well, said economists.

Indonesian hotel workers protest, carrying flags and masking their faces.
Indonesian hotel workers demand higher salaries.
A fall in the value of the Japanese currency is forcing its neighbours in Asia to chose between two evils:

Either they must keep their currencies strong, but if they do they will lose market share to cheaper Japanese exports.

Or they must devalue their currencies, a move that will hit consumer confidence in their own countries.

"Seeing currencies around the region going down will dent whatever domestic demand there is, so you could get a further downleg in gross domestic product growth and even deeper inflation," said Tim Condon of ING Barings.

A Kuala Lumpur stock exchange trader sleeping at his desk.
Malaysian share prices have fallen 9.5% since January.
"A weakening Japanese yen will increase the likelihood of Asian exports contracting for the first time since early 1999," Barclays Capital economists said.

Mr Subbaraman said the outlook is bleak.

"If Asia is going to be hit by a double-whammy of Japan as well as the US, the effect could be a lot more than in the past," he said.

Optimism

Other economists disagree.

Anti-globalisation workers in the Philippines.
Anti-globalisation workers call for the government to protect jobs in the Philippines.
Japanese consumers' appetite for cheap goods have grown as a consequence of the economic dip in the country.

This should help sustain exports from other countries in the region, predicted Morgan Stanley Dean Witter's Andy Xie.

In addition, economic growth in China should aid further growth in East Asia, predicted Yenpao Chen, director of forecasting at the Chung-Hua Institution for Economic Research.

"If Japan is slowing down and the United States is contracting, probably the market in mainland China is what we have to count on," he said.

Troubled region

But East Asia's recovery from the last economic crisis is far from complete.

Daewoo workers in South Korea burn a US flag t
Daewoo workers in South Korea burn a US flag to protest a sale of the company to General Motors.
Most economies in the region remain fragile, and it is not certain that they can handle another knock.

In Thailand, hundreds of unfinished towerblocks bear testimony to the way its economy ran out of cash three years ago.

In Malaysia, the stock market has lost almost 10% of its value since the beginning of the year, and while shares have become cheaper everything else has become more expensive with inflation climbing sharply.

It is not very different elsewhere in the region, where angry workers have taken to the streets to protest the effects of globalisation on their job security, on their salary levels, and on their lives.

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See also:

16 Mar 01 | Business
Dark clouds over Asia
09 Mar 01 | Business
Asia's business week
11 Jan 01 | Business
IMF warns of slowdown
22 Jan 01 | Business
Philippines economy on the brink
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