China, India likely to drive Asian economic growth: EIU
Posted: 5:51 PM | Aug. 05, 2003
Martin Abbugao
Agence France-Presse
SINGAPORE--China and India are forecast to drive Asia's economy between now and 2007 to keep it the world's fastest growing region, but the rest of Asia is expected to post only modest expansion, a report said Tuesday.
In its latest quarterly report, the Economist Intelligence Unit (EIU) also warned of risks that could affect its projections for global growth, including a possible collapse of the US dollar against the euro, terrorism and a resurgence of the Severe Acute Respiratory Syndrome (SARS).
The Asia Pacific, excluding Japan, should grow at an annual average of 5.6 percent between 2003 and 2007, the fastest expansion rate of any region in the world, the EIU said in the report received here.
But unlike in the mid-1990s, when growth was dispersed across the region, the giant Chinese and Indian economies will be the main drivers.
"Growth (measured using market exchange rates) in emerging Asia as a whole is forecast to be higher than in other emerging regions, but this is largely owing to strong performances in mainland China and in India," it said.
"This is very different from the mid-1990s, when Asia's performance was linked to rapid economic growth across much of the region."
China and India are the region's second and third largest economies respectively after Japan.
China's economy is projected to grow seven percent this year despite the impact of SARS as export volumes continue to expand and domestic demand is robust.
India should grow at an average 5.9 percent in the fiscal year 2003 to 2004 and 6.7 percent in 2004 to 2005, driven largely by the services sector.
Pakistan should see its economy expand 5.8 percent in fiscal year 2003 to 2004 and 5.3 percent in 2004-2005 underpinned by a strong textile sector and public spending.
For the rest of East Asia, Hong Kong is expected to grow at 1.1 percent this year and South Korea at 2.8 percent, with the economy seen recovering in 2004.
EIU did not give a growth figure for Taiwan, but said expansion there would be subdued until next year.
The 10-member Association of Southeast Asian Nations (ASEAN) grouping is expected to grow "only slightly faster than Eastern Europe" at 4.4 percent a year over the four-year period.
Communist-led Vietnam is seen to be ASEAN's star performer with an average annual growth of nearly seven percent between 2003 and 2007.
Vietnam's liberalization strategy has allowed the non-state sector to compete equally with state enterprises and the tourism sector to develop robustly, EIU said.
Singapore is seen to grow two percent this year, with Malaysia expanding at a faster rate of 3.9 percent mainly because of its "aggressive fiscal policy aimed at lifting consumption".
Thailand should grow at 4.8 percent this year, Indonesia 3.2 percent and the Philippines four percent.
Australia's gross domestic product is forecast to grow at 2.7 percent this year, slower than last year's 3.8 percent.
The EIU did not give full four-year average figures for all countries.
Summarizing the challenges to Asia's export-dependent economies, EIU said import demand from the industrialized countries "will remain far slower" compared with the 1990s.
"Demand in the technology industry has improved over the last six months, but remains sluggish in comparison to the heady growth rates seen in the late 1990s and is therefore acting as a break on the important Asian technology industry."
EIU outlined three major risks to global growth: deflation, a US dollar collapse against the euro -- which would be good for US exports but wreak havoc overseas -- and a stalling of domestic demand in the United States.
A sharply weaker US dollar "remains a serious concern" despite the greenback's recent rebound as the United States continues to run a substantial current account deficit, the EIU said.
For Asia, EIU said a resurgence of SARS later this year cannot be ruled out.
"The threat to the global economy from terrorism has not receded and attacks across the world remain likely," it added.
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