19 December 2003
Asia's economies are looking forward to a rosier 2004, helped by strong growth in exports and an upturn in domestic demand. China's growth and the United States economic recovery are playing key roles in the upbeat assessment.
Asia is facing a bright economic outlook going into 2004, with some countries expected to turn in their strongest performances since the regional financial crisis of 1997.
The turnaround as 2003 came to a close marked a stark contrast to the uncertainties early in the year. The war in Iraq and the tourism downturn caused by the outbreak of Severe Acute Respiratory Syndrome sent most regional economies tumbling.
By the fourth quarter, Asia had rebounded. The long bear market has ended, with most Asian stock markets ending 2003 higher than they began it, the first year of gains since 1999 for many regional markets. Thailand's key stock index has nearly doubled in value over the past year, the main index in Pakistan has jumped 60 percent, and Japan's Nikkei index has gained almost 20 percent.
"I think the outlook is very positive, much more positive than we thought just a few months ago," said Raj Kumar, a senior economist with the United Nations regional office in Bangkok. "We expect a growth of about 6 percent next year for the developing countries of the region."
Mr. Kumar says Asia is being buoyed by strong export growth, especially to the United States, which also is experiencing an economic recovery. Many nations saw export gains of more than 20 percent, and the trend is expected to continue in 2004. Mr. Kumar says the growth is being backed by "confident" business sentiment.
Mr. Kumar says China plays a leading role in the region's positive economic outlook.
"China has emerged as another source of growth for the region, in the sense that its economy is growing at more than 8 percent per annum. It has increased its imports from the region in leaps and bounds."
Citigroup's top economist for Asia, Don Hanna, says high-technology exports should be strong in the coming year, which is particularly good for Singapore, South Korea and Taiwan. Those economies slumped after U.S. demand for computers and memory chips tumbled in 2001.
"One of the main positives continues to be the strength of demand coming out of the United States, where we think that import demand is going to be quite strong, despite the weaker dollar, plus, in particular, that U.S. investment is going to drive the demand for tech products, of which Asia is a large producer," Mr. Hanna said.
He says South Korea also should see strong growth in its overall output of goods and services.
Thailand was the second fastest growing economy in the region in 2003 after China. Higher domestic consumption and export growth have driven the economy, which has consistently beaten forecasts in recent months.
The state-owned think tank, the National Economic and Social Development Board in Thailand, raised its 2003 forecast for gross domestic product growth to 8 percent, well up from its original forecast of 6.3 percent.
"I think the short-term view of Thailand, it's going to be one of the star performers in Asia," said Bob Broadfoot, of the Political and Economic Risk Consultancy in Hong Kong. "I really don't think there are any things that are going to de-rail it now."
But Mr. Broadfoot says there are some concerns that Thailand could build up another financial bubble, as it did before the 1997 economic crisis. He says, however, that is unlikely to happen next year.
"A major trend going into 2004, analysts say, is that regional currencies are likely to strengthen against the U.S. dollar. A weaker dollar would probably cut U.S. demand for exports from Asia," he said.
Richard Duncan, author of the book, "The Dollar Crisis," says a lower dollar is necessary to correct the trade imbalances that have arisen between Asia and the United States.
"The total current account deficit with the entire world is something like $550 or $600 billion this year," Mr. Duncan said. "And the only way it can be fixed is if the other countries allow their currencies to appreciate against the U.S. dollar." Some economists also warn there is a chance that China's economy is overheating. There already are signs the government is trying to gently cool it off. If Beijing is successful, growth will moderate from above 10 percent expected in 2003 to about 7 percent in 2004. However, if Beijing's measures are too heavy-handed, growth could fall more steeply, which would cut China's demands for goods from its Asian neighbors.
Despite those risks, many economists say Asian governments still can expect more growth in the coming year. Inflation is low, and interest rates are down, all of which is good news after the uncertainty seen through much of 2003.