DEVELOPMENT: Asian Economies Projected to Grow Fastest

By Thalif Deen Reprint | | Print |

Thalif Deen

UNITED NATIONS, Apr 21 2000 (IPS) - The world’s fastest economic growth rates are expected to be in South and Southeast Asia which will collectively reach about 6.2 percent each in 2000 and 2001 compared with 5.8 percent in 1999, according to latest figures released here.

The most vibrant growth will be in South Korea (8.2 and 7.3 percent in 2000 and 2001 respectively), followed by China (7.5 and 7.6 percent), Malaysia (7.2 and 6.9 percent)and India (6.5 and 6.8 percent).

In a report titled “Global Economic Outlook”, the UN says that most crisis-affected East Asian countries have been recovering at a robust pace since 1999, with South Korea leading the group with a record 10.7 percent growth in 1999.

The financial crisis of mid-1997 virtually destroyed the economies of Thailand, Indonesia, South Korea and the Philippines. As a result, the International Monetary Fund (IMF) had to bail out South Korea with 58 billion dollars in financial assistance, Indonesia with 43 billion dollars, Thailand with 17.2 billion dollars and the Philippines with about 1.0 billion dollars. But virtually all of these economies have gradually recovered from the devastation.

“Strengthening domestic demand and the foundations for sustainable export growth are expected to continue to lead the expansion in East and South Asia,” the report said. In contrast to the projected 6.2 percent growth in South and Southeast Asia, African economies are expected to grow by 4.4 percent and 4.5 percent in 2000 and 2001 respectively while the economies of Latin America and the Caribbean will grow by about 3.7 and 4.2 percent.

The collective economic growth in the world’s industrial nations, however, is expected to reach only about 3.0 percent each in 2000 and 2001. The strongest growth will be in the United States – at 4.2 percent in 2000 and 3.7 percent in 2001 compared with Japan’s 0.9 percent and 1.9 percent.

The UN study, released Thursday, says the economic performance of the United States over the past few years has been “unprecedented” in recent history. By March 2000, the current upswing set a record for the longest period of continued economic expansion – 108 months in a row.

“It is not only the length but also the strength of the current expansion in the US with low inflation and low unemployment that has been surprising – indeed puzzling – economists and policy makers,” the report said.

An important feature of the US economy has been a rise in the trend of productivity growth since the mid-1990s. In 1999, labour productivity rose over three percent compared with the average of just half that magnitude over the past two decades.

Meanwhile, the information technology revolution has been accompanied with capital deepening and improved labour quality, according to the report. These have recently been seen as the main causes for the higher productivity growth.

In contrast, the Japanese economy remains sluggish, as the large scale government stimulus spending in the past several years has thus far failed to put consumption and investment on a self-sustained path.

After a very tepid recovery of 0.3 percent in 1999, gross domestic product (GDP) is expected to expand only by 0.9 percent in 2000 and by 1.9 percent in 2001. The report, however, points out that the economic outlook for most developing economies has become more optimistic.

Progress in domestic reforms, though varying from country to country, and the improved international environment, such as the strengthening of commodity prices and stabilised global financial markets, have been instrumental in changing the foundations of growth, according to the report.

Recovering from two years of slowdown, GDP growth for developing nations as a whole is expected to be 5.2 percent in 2000 and 5.5 percent in 2001.

The report also points out that a “strong rebound” is expected in Latin America and the Caribbean. After a stagnation in 1999, GDP is expected to register 3.7 percent growth in 2000 and a further acceleration to 4.2 percent in 2001.

With improved external financing conditions for Latin America, investment is expected to lead growth. However, high levels of unemployment and tight credit in several economies may limit the feasible pace of growth in domestic demand, according to the report.

In the case of “economies in transition”, the study says that recent developments in the Baltic region, Central and Eastern Europe and the Commonwealth of Independent States, have also been positive. Growth is expected to reach three percent in 2000 and 3.4 percent in 2001, up from 2.9 percent in 1999. The Russian economy, on the other hand, is projected to stagnate at 2.5 percent in both 2000 and 2001.