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Fri, Sep 14, 2001 - Page 21 News List

ADB assesses effects of terrorist attack

CHAIN REACTION Even though regional stock markets plunged on Wednesday, the bank says there will only be a short-term negative impact from America's woes


The economic fallout in Asia from terrorist attacks in the US is likely to be limited and an export-led recovery is still expected next year, Asian Development Bank (ADB) experts said yesterday.

They said the carnage across stock exchanges Asia Wednesday that wiped billions of dollars off the value of listed companies was only a temporary reaction to the devastating attacks that struck New York and Washington.

"This is a short-term negative impact which will be mitigated to a reasonable level," ADB vice president Shin Myoung-ho said at a briefing in Singapore for the release of a book on key Asian economic indicators.

He added that Asian economies had developed "a greater sense of resilience" after the trauma of the 1997-1998 financial crisis and should be able to withstand the short-term impact of the US security crisis.

But the much-anticipated regional recovery is now likely to be delayed to the second-half of 2002 instead of the first quarter as earlier projected, said Nagarajah Gnanathurai, the Manila-based ADB's assistant chief economist.

"It will certainly be delayed by several quarters, probably [to] the third quarter," he said, adding that ADB economists were still analyzing the impact of the terrorist attacks on regional growth.

There will be a downward revision of the ADB's regional growth outlook and the new projections are expected to be released next month, said Gnanathurai said.

"Certainly the numbers are going to be revised downwards," he said.

The ADB in June projected 6.1 percent growth for East Asia this year and 4.8 percent for the five countries worst hit by the 1997-1998 crisis -- Malaysia, Indonesia, South Korea, the Philippines and Thailand.

He said the attacks on the US "would have a traumatic impact" but stressed that the negative impact would not extend into the longer term "because the fundamentals for most Asian economies are very good."

High levels of savings, declining birth rates and strong take-up of new technologies will provide the region with a firm foundation, said Gnanathurai.

The short-term fallout is not going to push some of the more fragile economies into a full recession, he said.

"Technical recession is already happening, at least in Taiwan and Singapore, said Gnanathurai.

"But we don't see this incident driving more economies over the brink. Over the longer term, the picture still augurs extremely well for the recovery of the Asian economy, he said.

Even as the world continues to assess the impact from the terrorist attacks, Gnanathurai said several positive signs had emerged which will eventually benefit the global economy.

The tragedy has triggered a sense of solidarity among the industrialized economies and this will result in "much better policy coordination among them," he said.

"And this augurs very well for the recovery of the global economy," said Gnanathurai.

The global economy is also expected to get a boost from central banks who have announced plans to inject more liquidity to bolster market sentiment, he said.

Pledges by members of the Organization of Petroleum Exporting Countries that they would ensure there is no shortfall of crude oil in the world markets was also positive, said Gnanathurai.

"So we see positive signs in the light of what happened two days ago," he said.

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