East Asia may register strong growth for 2002

The ADB looks ahead * China's economic growth should lead the region this year at 7.4 percent, rising to 7.7 percent in 2003. * South Korea's projected 6.1 percent growth this year, may be followed by a 6 percent expansion in 2003.

East Asia is on track to post 5.8 percent economic growth this year, slightly better than earlier forecast, despite uncertainty surrounding the US recovery, the Asian Development Bank (ADB) said yesterday.

The Manila-based bank raised its growth forecast for the region by 0.6 percentage points, saying the global trade recovery and strengthening domestic demand should lead to more balanced economic expansion.

It conceded in its quarterly Asian Economic Monitor (AEM) report that "risks to the US recovery have increased" with a recent stock market slide, lower retail sales in May and softening consumer sentiment in June.

"Yet so far, these risks appear to be manageable and are unlikely to derail the moderate recovery in the US forecast in the April AEM."

East Asia's exports fell last year, due in a large part to recession in the US and Japan and the Sept. 11 terrorist attacks. Economic growth in the region subsequently slid to 4.3 percent, the lowest rate since 1998 during the Asian crisis.

"With a moderate recovery still the most likely outcome for the US, GDP growth for Japan revised upwards, and growth prospects unchanged for Europe, East Asia continues to face a favorable external environment," it said.

China's growth should lead the region this year at 7.4 percent, rising to 7.7 percent in 2003. South Korea's projected 6.1 percent growth this year, followed by a 6 percent expansion in 2003, would move it closer to its historical trend, it said.

The Association of Southeast Asian Nations (ASEAN), excluding Brunei and Myanmar, should see average growth of 3.8 percent this year, further strengthening to 4.7 percent the following year, it said.

The countries included in the ASEAN forecast are Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

"The more open economies are picking up at a faster pace. This is to be expected as the resurgence in growth is driven primarily by a rise in global demand for the region's exports, although domestic demand has played a complementary role," it said.

ADB forecast in April that East Asia would see a moderate rebound from the economic slowdown last year. The recovery has been accompanied by subdued inflation, while most regional currency exchange rates, having remained stable against the US dollar in the first quarter of this year, have since appreciated.

The report said the appreciation should not dampen the rebound because most of the region's currencies have depreciated against the yen and the euro.

"With the maintenance of political stability and improvements in prudential indicators in most countries of the region, domestic risks to East Asia's current economic rebound appear to be receding somewhat," the bank said.

Almost of these countries continue to run current account surpluses, foreign exchange reserves have improved significantly, and the ratios of short-term debt to total debt and foreign debt to GDP were now lower than during the Asian crisis, the bank said.