Development Bank predicts Asian economic rally
By Glenn Scott
Advertiser Staff Writer
Constrained by the same key external economic pressures that influence Hawai'i, Asia's overall economic growth is slowing this year but should rebound in 2002, officials from the Asian Development Bank said yesterday in Honolulu.
After 7 percent regional growth in 2000, Asia's growth will drop to 5.3 percent this year in large part because of the downswing in the U.S. economy, bank Vice President Joseph Eichenberger told local economists during a morning gathering at the downtown First Hawaiian Center.
Summarizing the findings in the bank's annual outlook report, which was released yesterday, Eichenberger and senior financial adviser Charles Adams said reduced U.S. consumer demand has lowered pro-spects for Asian economies, particularly for those heavily involved in exporting electronics to the United States.
They said the bank's estimates also reflect the unchanged state of Japan's economy, which likely will remain mired in a 1 percent to 2 percent growth pattern through next year.
"Japan has been stuck now for a decade in this narrow corridor of weak growth," Adams said. "But we don't think it is destined for a recession."
The bank executives delivered the report in person here this year as part of their efforts to raise awareness of the multilateral institution's mission in advance of its annual meeting, which will draw about 3,000 participants May 7-11 to the Hawai'i Convention Center. With 59 member countries, the Manila-based bank distributes about $6 billion annually in loans and grants in its efforts to raise the economic prospects of developing Asian countries and their people.
Though focused on Asia, the bank report offered somewhat hopeful, if indirect, forecasts for Hawai'i as well by basing its predictions on a premise that the U.S. economic downturn will turn out to be a brief, cyclical event and that the economy should start improving by next year.
Adams said, however, that few economists expect the U.S. economy to rev back to the "hectic" levels of growth characteristic of the late 1990s.
"The key message we have," said Adams, "is of a relatively short-lived but quite probably sharp slowdown."
The ways a Mainland slowdown affects Asia are fundamentally different than how a slowdown plays in Hawai'i, of course, since Asian economies are geared toward exports and Hawai'i's economy is reliant on attracting Mainland tourists. In both cases, though, economists point to the key issue of consumer confidence — whether American buyers feel emboldened to spend money on new products or to commit toward Island vacations.
Bank officials also note that the stakes for Asia are crucially high as the multinational bank aims to improve conditions and reduce poverty in a part of the world where, they say, 900 million people still live on the equivalent of $1 a day.
"Sustained progress is integral to addressing in an enduring way the profound poverty issues that still exist in Asia," Eichenberger said.
As for the influence of the U.S. economy, bank economists said even a brief slowdown will have ripple effects in Asian countries that have powered their economic and lifestyle improvements on past successes in inter-regional trade. Eichenberger noted that 11 percent of Asia's gross domestic product is directly tied to trade with the United States and Japan.
International trade has a particularly strong influence on the performances of the newly industrialized economies of Hong Kong, Taiwan and Singapore, the bank noted. As a result, the bank predicts those economies, which grew at a healthy 7.9 percent last year, will grow at 4.3 percent this year and 5.6 percent in 2002.
Also likely to struggle this year are the five countries most affected by the Asian Financial Crisis of 1997. The bank said Indonesia, South Korea, Malaysia, the Philippines and Thailand had a combined 6.8 percent growth rate last year but should reach less than 4 percent this year and 5 percent next year.
Conversely, stronger domestic demand emerging in China and India means they should still grow at 7 percent this and next year, down only slightly from last year's 8 percent mark.
The bank also serves developing Pacific Island countries, including Samoa and the Marshall Islands, and said growth there should range from 3-5 percent through 2002.
Glenn Scott can be reached by telephone at 525-8064 or by e-mail at gscott@honoluluadvertiser.com
