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Analysts Upbeat on Asian Growth Despite High Oil Prices - 2004-08-17


Asian economies are weathering the current rise in oil and energy prices. Business analysts remain upbeat over the region's economic outlook, even as international politics and high energy demand push oil prices toward 50 dollars a barrel.

The Asian Development Bank expects the region's economies to grow at just more than seven percent in 2004, up from 6.6 percent last year. The growth will be fueled by strong domestic demand, which is expected to persist even as oil prices hang at record levels.

The chief economist with the U.N. Asia Pacific office in Bangkok, Raj Kumar, thinks the high oil prices will only marginally affect the markets.

"We expect growth to be still maintained for this region, although if the oil price were to be sustained, a half a percent knock off [from growth] would be there" he said. "But I am very confident that this will not dampen growth here."

Mr. Kumar does see some pressure on government budgets in countries such as India, Thailand and Indonesia, that subsidize public oil prices.

But so far the main damage from oil prices has been in the financial markets, where many investors are selling stocks. Don Hanna is the Citigroup head of market analysis and economics for Asia Pacific, in Hong Kong.

"...Some of the equity markets in various countries have been hurt because of fears of lower growth and higher inflation, as well as in some countries, a worsening current account due to higher oil prices," explained Mr. Hanna.

So far, higher oil prices have not slowed Asia's vital tourism business. Pacific Asia Travel Association spokesman John Koldowski says the travel industry remains strong, with air passenger traffic up by almost 30 percent over last year.

"We believe demand for travel is so strong, the momentum is so powerful now, that it will probably ride through any of those sorts of barriers as long as they are short term," said John Koldowski.

Economists fear, however, that if oil prices remain high, corporate profits in Asia could fall, leading to lower spending by a key source of Asia's economic growth, consumers.

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