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East Asia's Economic Growth Expected to Rise in 2006


Next year should be another strong one for the economies of East Asia, according to the Asian Development Bank. A turnaround in global demand for information technology (IT) products and China's continued growth are boosting the region.

The Asian Development Bank projects a strong 7.2 percent average growth for East Asia in 2006, just up from the estimated 7.1 percent this year. The forecast covers the 10 members of the Association of Southeast Asian Nations, plus China and South Korea.

China is the economic giant in the region and continues to boom. The bank forecasts Chinese growth in 2006 at just under nine percent, a slight drop from the 9.13 percent expected this year.

The ADB says private consumption is driving the Chinese economy, as consumers purchase durable goods such as automobiles, refrigerators, washing machines, and other home electrical goods. Investment growth is slowing, but remains robust.

Masahiro Kawai, who heads the ADB's office of regional economic integration, says that China also gives a boost to the region by importing a variety of goods from its Southeast Asian neighbors.

"Energy being imported from Indonesia, food being imported from many ASEAN countries, industrial materials produced by Malaysia, Thailand, the Philippines, [South] Korea also is a big exporter to China of IT products," said Mr. Kawai.

The other big boost for the regional economy next year is an expected increase in worldwide demand for information technology products such as computers, memory chips, semiconductors and electronic products that contain semiconductors. Mr. Kawai says this means more business for the many East Asian countries that manufacture such goods.

Some of the highlights in the regional economy include Singapore, which is projected to grow by six percent in 2006, from 5.2 percent this year. South Korea will rise by 5 percent, compared with 4 percent this year.

Indonesia goes to 5.9 percent from 5.5 percent, Thailand to 5 percent from 4.5 percent, and Malaysia to 5.3 percent from 5.1 percent. Laos goes to 8 percent from 7.2 percent and the projection for the Philippines is growth of 4.8 percent from 4.7 percent.

There are hazards. The most important one, according to Mr. Kawai, is something called a disorderly adjustment in the growing global payments imbalance. He says the United States runs a large current account deficit and it must cut its budget deficits and increase its savings rate. Otherwise, he warns, there could be a large depreciation in the value of the dollar and this would put pressure on Asian currencies to rise. He says this could lead to economic disorder.

The ADB, a nonprofit development lender, says a sharp upturn in global interest rates, further increases in oil prices, and a possible bird flu pandemic also present major risks to East Asia.