Asian growth 'best in the world'

China is fuelling the growth

Asia will maintain its prime position as the fastest growing region of the world despite the economic shock of the Sars epidemic, according to a new report from the Asian Development Bank.

The Sars virus, that killed more than 900 people, also cost nearly $60bn (£35.9bn) in reduced demand and lost business revenue.

But the bank said the determined action of governments helped quickly diminish the impact of Sars in countries such as Singapore and China.

The bank also pointed out that the relatively strong outlook "is all the more remarkable" given the weak performance of the US and the eurozone in the first half of the year.

The bank is now predicting that Asia, excluding Japan, will grow by 5.3% this year and by 6.1% in 2004.

The strong outlook was credited to China's rapid expansion, but also helped by a significant improvement in Singapore and Thailand.

But there are still risks facing Asia, including a new outbreak of Sars, the lingering threat of terrorism and the uncertainty of the global recovery.

Japanese gloom

Japan's economy, the second largest in the world which has been battling a recession for more than 10 years, is traditionally excluded from the bank's regional report.

Economists are still waiting to see whether the recovery of the US economy can help drag Japan out of the doldrums.

On Tuesday, the latest jobless figures showed signs of improvement, with unemployment easing to a two-year low of 5.1%.

But chief cabinet secretary Yasuo Fukuda warned against being over-optimistic.

"The numbers came in as good news, but we still think the environment is harsh," he told a news conference.

His caution was backed up by a surprise fall in industrial output as demand for machinery fell.

The drop of 0.5% marked the first fall in two months, and underlined that it is still too early to talk of any recovery in Japan.

"The trend remained flat and the outlook for final demand uncertain," the trade ministry said in a statement.