The average economic growth of 18 key economies in the Pacific Ocean rim will slow down to 4.2 percent this year from 5.4 percent last year and risks could further affect their outlook, a regional think-tank said yesterday.
The Singapore-based Pacific Economic Cooperation Council (PECC), which brings together government officials, academics and businessmen, said in its forecast for this year and next is that trade and financial imbalances remained too high in the region.
"After a blistering economic expansion in 2004, the Asia Pacific region is poised for slower but still robust growth in 2005," PECC said.
"The traditional growth engines in the region -- the United States and Japan -- turned in very robust growth of 4.4 percent and 2.6 percent respectively, pulling along the rest of Asia Pacific," it said.
Last year also marked the confirmation of China as a new growth engine for the region, PECC said.
"In the course of the year, China overtook Japan as the second most important trading partner for many Asia-Pacific economies and also overtook the United States as Japan's most important trading partner," said Yuen Pau Woo, head of PECC's forecasting panel.
For next year, the region's 18 economies are projected to grow at 4.2 percent with trade and financial imbalances looming as threats to their economic growth prospects, PECC said.
The imbalances refer to the twin US budget and current account deficits, the accumulation of huge foreign currency reserves by Asian central banks and divergent growth rates in the world's major economies.
In particular, the US current account deficit is worrisome because the region's central banks have massive foreign reserves denominated mainly in the greenback.
"A sudden loss of confidence in the US dollar could lead to a disorderly decline in the value of the US currency, which could spill over into financial markets and the real economy," PECC said.
"Asian central banks play a key role because of the substantial foreign reserves that they hold in US dollar-denominated assets estimated at US$2 trillion in 2004," it said.
The US current account deficit is tipped to swell to a record US$755 billion or 6.1 percent of its GDP by the end of this year, PECC said.
The region's major economies led by the US are all poised for slower growth this year, the PECC report said. US economic growth will cool to 3.5 percent this year following a "record-breaking clip" of 4.4 percent last year.
China's growth this year is tipped at 8.5 percent from 9.5 percent last year with private consumption to emerge as a growing economic driver.
"Fears of a hard landing did not materialize in 2004. Rather, the economy has continued on its breakneck pace of expansion into the first-half of 2005," PECC said.
Japan's economy is projected to slow to 1.3 percent this year from 2.6 percent last year.
For Southeast Asia, "the outlook for 2005 is for slower growth throughout the region, in part due to excessive expansion in such areas as construction and consumer spending, and also due to the less buoyant external demand," PECC said.
Thailand's economy is expected to grow by 5 percent from 6.1 percent last year, Indonesia by 5.5 percent from 5.1 percent, Singapore by 4.7 percent from 8.4 percent, Malaysia by 5 percent from 7.1 percent, the Philippines by 5.7 percent from 6.1 percent, Vietnam by 8.5 percent from 7.7 percent, Hong Kong by to 4.7 percent from 8.3 percent last year and Taiwan by 4 percent from 5.7 percent.
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