Asia to escape US economic woe

Malaysian economic growth will slow dramatically this year

The weakness in the US economy will not hurt the Asian and Pacific economies as much as previously feared, nor will the region's suffering be long lived, according to the Asian Development Bank's annual forecast.

Average GDP growth in the Asia Pacific region:

1999: 6.6%

2000: 7.1%

2001: 5.3% (projected)

2002: 6.1% (projected)

Source: ADB

In fact, Asia will be one of the fastest growing regions in the world this year, the Bank predicted in a report entitled Asian Development Outlook 2001.

But differences between sub-regions will emerge as some countries are hurt by sharp cuts in US imports.

Trade within Asia has grown dramatically in the past decade and might help reduce the region's vulnerability to external shocks, the Bank said.

"The effect of the US slowdown on [the Bank's] developing member countries will depend heavily on the behaviour of intraregional trade," the report said.

Rapid recovery

Average growth in the Asia Pacific region's gross domestic product (GDP) will dip this year to 5.3%, from 7.1% last year, due to "the effects of the slowing US economy and the moderation of the technology boom" which has aided the region's exports, the World Bank subsidiary predicted.

The tech boom helped Asian economies export themselves out of recession during the 1990s

But the recovery will be rapid, so that by 2002 the Asian economies will experience 6.1% growth, the Bank forecast.

However, these regional averages mask variations across sub-regions.

Some countries in Asia remain heavily dependent on exports to the US, and these countries will be hurt badly as the Americans cut back on their imports.

Newly industrialised economies

The report predicted that the southeast Asian countries as well as the newly industrialised economies Hong Kong, China, South Korea, Singapore and Taiwan will be hit the hardest.

Average GDP growth in the newly industrialised economies:

1999: 7.4%

2000: 8.4%

2001: 4.3% (projected)

2002: 5.6% (projected)

Source: ADB

In the newly industrialised countries, growth will slow from 8.4% in 2000 to 4.3% in 2001.

But the knock from the US slowdown will be cushioned.

Much of these countries' exports are made up of electronic components which are still in demand.

Stronger domestic demand following last year's boom in many countries will also help.

So the recovery will be quick in these countries as well.

By 2002 the newly industrialised economies will experience 5.6% growth, the Bank projected.

Risks

However, there is a risk that the US slowdown will last for a long time.

And there is much doubt about the health of Japan's economy.

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The US and the Japanese situations pose the greatest threats to global economic growth.

"The risks are especially significant for those developing member countries where recoveries depend heavily on exports, where financial and corporate restructuring is incomplete and where political uncertainties remain," the Bank observed.

Global growth

Asian growth forecasts compare well with the predictions for other regions.

World growth will fall from 4.8% in 2000 to 3.5% in 2001, then climb back to 4% in 2002, the Bank forecast.

In Europe and the US, growth will be much slower than in the world as a whole, at between 2% and 3% this year and next.