The prospect of war between the US and Iraq has prompted a research house to cut growth projections for Asian economies, predicting export-led recoveries, which began in the second quarter in Hong Kong, Singapore, Malaysia, and Taiwan, will stall, a report said yesterday.
Economists with the firm ING said small open economies dependent on the US could be badly affected by a brief war against Iraq, forecast during the first half of 2003.
Tim Candon, ING's chief economist for Asia, has cut his GDP forecast for the region -- excluding Japan -- to 5.5 percent in 2002, down from the original forecast of 6 percent.
For next year, he sees Asian GDP growing by 5.3 percent, from earlier forecasts of 6.2 percent.
ING has reduced its Singapore GDP growth forecast this year to 3.4 percent, from 5.4 percent. The projection for 2003 has been chopped to 3.2 percent, from an earlier estimated 5 percent.
China is the only country where the GDP forecast for 2002 remained the same, at 7.5 percent. For 2003, it is expected to slip from 7.5 percent to 7 percent.
In a report titled "Prepare for War", Camdon said a US invasion was still likely, despite Iraq's unconditional invitation to UN weapons inspectors to check out the country for weapons of mass destruction.
"The war itself would not last long and its end would precipitate relief rallies in financial markets, including surging stock prices, a rally in the US dollar, and falling credit spreads," Candon said.
Candon expects export-led recoveries, which began in the second quarter in Hong Kong, Singapore, Malaysia, and Taiwan, to stall.
Asia's increased dependence on the US made it more vulnerable, he said.
The research house downgraded Hong Kong's 2002 GDP growth to 1.4 percent from 2.0 percent; Taiwan's GDP to 3 per cent from 4.5 per cent; Malaysia's GDP to 3.9 percent from 4.3 percent; and Thailand's GDP to 3.7 percent from 4 percent.
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