Asian economies surprised forecasters in 2002 with healthy growth. While many economists expect growth to hold steady in the coming year, they warn of risks ahead, including the possibility of a war with Iraq and more terrorist strikes in the region.
While Asia has not returned to the booming growth of the early 1990s, the region's economy in 2002 ticked away quite well. Asia overall is expected to post economic growth of 5.6 percent or better this year.
Ifzal Ali is the chief economist for the Asian Development Bank in Manila. Throughout 2002, the ADB repeatedly raised its forecasts for growth. Mr. Ali said the gains are the result of several factors, including efforts of many countries to give businesses and consumers access to plenty of capital.
"In most countries, financial restructuring has progressed well. Secondly, the countries have adopted an expansionary fiscal policy and an accommodative monetary policy, which is likely to continue in 2003," Mr. Ali said.
Growth, however, has been patchy. While China is on track for eight percent growth in gross domestic product for 2002, and South Korea should grow by nearly six percent, Singapore is likely to show only about two percent growth. And Japan's economy is expected to be almost flat, both in 2002 and in 2003.
Many economists expect the pace of economic growth to stay steady in Asia in the coming year, at five percent to six percent.
Mr. Ali at the ADB said growth will be sustained by several factors, including strong consumer spending. "More importantly ... we're expecting that after many, many years, there will be a pick up in business investment. And exports, while they may not be sustained at the 2002 growth rates, they will be brisk," Mr. Ali said.
Economists warn, however, growth could be easily derailed. The biggest hazard is the weak U.S. economy: if the world's largest consumer market slows its spending, then Asia's crucial exports will fall.
New terrorist attacks in the region also could undermine growth. Already, Indonesia has cut its economic forecast for 2002 because of the plunge in tourist arrivals after the October 12 bombing in Bali that killed almost 200 people. New attacks would scare more tourists from the region and foreign companies may decide it is safer to invest elsewhere. If the United States goes to war with Iraq over Baghdad's suspected illegal weapons programs, Asian economies could get caught in the crossfire. A war would drive up oil prices, cut demand for exports and do even more damage to Asia's tourism industry.
Some business people in Asia say the fear that war is on the way already has cut sales. Chow Sai Hang runs Signature Models Manufactory, a small Hong Kong company that makes expensive miniatures of classic cars. Most of his clients are in the United States. He said that until the middle of 2002, sales were good.
"After Mr. Bush is talking about the war, the clients all just shut down the business, and then waiting what will happen, they want to fight or no?" Mr. Hang said.
Asian exporters like Mr. Chow also suffered in 2002 because of labor problems in the ports on the United States West Coast. Many of his clients cut their orders because shipments wound up sitting on the docks for weeks.
Mr. Chow said he is not confident that business will be much better in 2003, because he does not expect the U.S. economy to improve. "Mr. Bush still [has] a problem like his father. He's not very good for the economics," Mr. Chow said.
The risk of war also weighs down Asia's stock markets. Markus Rosgen is the Asia stock market strategist for investment bank ING. He expects the United States will take military action against Iraq in the next several months. "And so hence what you get in the first quarter is war uncertainty, which is bad for equity markets. It's also bad for consumers and corporate spending. So that's what drags down Asia," Mr. Rosgen said.
Even without a war, Mr. Rosgen thinks most Asian stock markets will fall in the first half of 2003. That is because he expects slow economic growth in the United States and more losses on the U.S. stock markets.
Investors in Asia took a beating in 2002. Tokyo's Nikkei stock average lost around 20 percent during the year, Australia's main share index is down more than 10 percent, and Hong Kong's Hang Seng lost about 16 percent. Only a few small stock markets, such as Pakistan and Thailand, are finishing 2002 higher than they started it.
Part of VOA's yearend series