SINGAPORE, Sept. 18 (UPI) -- Recovery in Asia's developing economies remains intact and will strengthen further next year despite the weaker-than-expected economic performance of the United States and other industrial countries, the Asian Development Bank reported Wednesday.
According to the ADB, the most significant short-term risk to the overall outlook is the possibility of a sharp downturn in external demand, which could occur if the United States returns to recession or if oil prices spike.
The region's average gross domestic product growth is projected to rise from 3.7 percent in 2001 to 5.0 percent in 2002 and 5.7 percent in 2003, the ADP said. But the outlook varies across the region, with South Asian economies likely to grow at a slower pace due to poor weather, while strong investment growth is lifting the growth forecast for Central Asia and relatively robust consumption is helping economies in East Asia.
Clear signs of stronger economic performance emerged throughout the region in the first half of 2002, including generally higher rates of quarterly economic growth and improved export figures. However, there has been scant evidence of a significant turnaround in investment at this stage. This could gradually improve in the second half of the year, giving further strength to the pace of economic recovery.
Southeast Asian countries alone are expected to post a slightly stronger than expected growth of 3.8 percent this year and 4.6 percent in 2003, higher than previously expected, as exports recover and domestic consumption demand remains strong in several countries. GDP growth this year will range from slightly above 3 percent in Indonesia to around 6 percent in Laos and Vietnam. For 2003, GDP growth will range from around 4 percent in Thailand to around 6 percent in Cambodia, Laos and Vietnam.
One of the challenges for the region remains in-depth reforms and corporate restructuring, with investment to remain sluggish unless full-fledged reforms are carried out. Without these reforms, it will be difficult to foresee a sustainable and long-lasting recovery, the ADB warned.
In South Asia, prospects are likely to improve further, though the pace of growth will be slower than previously expected. The subregion's economy is expected to grow by an average 3.9 percent in 2002, well below the 5.4 percent forecast by the bank five months ago, and by 5.7 percent in 2003 (previously 6.4 percent).
These lower growth prospects reflect abnormal weather patterns, as well as the global economic slowdown and security concerns. India's GDP is seen at 4.0 percent for the fiscal year ending March 2003, and Pakistan's at 3.6 percent for the fiscal year ending June 2003.
East Asia's developing economies are expected to grow by an average of 5.7 percent this year and 6.1 percent in 2003, with China and South Korea leading the way.
China's economy is expected to grow by 7.4 percent this year and 7.5 percent in 2003, while South Korea will grow by 6.0 percent and 5.8 percent, respectively.
The uncertain pace of the U.S. economic recovery poses significant downside risks for economic growth in East Asia. However, the robust economic growth of a number of economies in the region, especially that of China, will help mitigate such risks, the bank noted.
