Tue, Dec 21, 2004 - Page 11 News List

Strong growth in Asia as China powers ahead

AFP , MANILA

Dragged along by a booming China, East Asian countries should grow 7.6 percent this year, their best result since the region's 1997 financial crisis, the Asian Development Bank (ADB) said yesterday.

Barring an unlikely Chinese crash, an oil price spike and a "disorderly adjustment of the US current account deficit," growth should moderate to a still "solid" 6.5 percent next year, it said in an updated forecast.

The ADB advised fiscal consolidation across the region, especially among the region's larger economies, with the exceptions of South Korea and Singapore.

With the exceptions of Malaysia and Thailand, and to a lesser extent South Korea, monetary policy also needs to be tightened, especially with inflation edging up, the Manila-based lender said.

East Asian economies should also improve exchange-rate flexibility and pursue structural reforms to invigorate private investment as regional inflation rises, global electronics demand softens and the US and Japanese economies ease up, it added.

"With most industrial countries posting robust growth, the external environment facing East Asia has continued to be favorable this year," it said.

"It is expected to be less favorable in 2005 as growth in the US and Japan slows from this year's high level and the global electronics sector softens," it said.

Electronics exports of US$361 billion accounted for 34 percent of the region's merchandise shipments last year.

The bank raised its growth forecasts for China to 9.3 percent from 8.7 percent for this year, and 8.0 percent from 7.7 percent next year.

It raised this year's forecasts for Singapore to 8.3 percent from 6.9 percent, and Malaysia to 7.1 percent from 6.5 percent.

However, next year's outlook for the latter two countries were cut slightly to 4.4 percent from 4.7 percent and 5.4 percent from 5.6 percent, respectively.

The forecast for South Korea dimmed to 4.8 percent growth from 5.4 percent this year, and 4.2 percent from 4.9 percent for next year.

The report warned that a sharper-than-expected economic slowdown in China "would hurt next year's growth prospects in several East Asian countries" but it would also "lower the risk of higher oil prices, given that [China's] rapid growth has been a significant factor in this year's rise in oil prices."

Thailand, Singapore, the Philippines, Malaysia and South Korea would be most at risk of a sharp cooling in China's rampant economy.

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