EMERGING ASIA ENTERS TRANSITION FROM RECESSION TO RECOVERY

By D. Arul Rajoo

PHUKET, July 23 (Bernama) -- Although economic growth is continuing to slow
down this year, emerging East Asia has entered the transition from recession
to recovery, says the Asian Development Bank (ADB).

In its July issue of the Asia Economic Monitor (AEM) released today, the
bank said deep recessions in the United States, Europe and Japan would continue
to hurt emerging East Asian economies, especially the smaller ones that are
highly reliant on exports.

AEM said larger economies in the region that have implemented major
fiscal packages are beginning to see results from the domestic stimulus, most
notably China.

"Emerging East Asia could see a V-shaped recovery, with growth dipping
sharply in 2009 before regaining last year's pace in 2010," said Jong-Wha Lee,
ADB Chief Economist and Head of the Office of Regional Economic Integration.

However, given the tentative nature of the expected recovery, it is critical
that authorities stay the course in supporting domestic demand and growth.

AEM said monetary and fiscal policies in the region need to remain
accommodative until the recovery gains substantial traction.

"Regulatory reform should eliminate gaps and overlaps, avoid regulatory
arbitrage, increase transparency and improve coordination among relevant
authorities.

"Emerging East Asia should reinforce cooperation in enhancing financial
stability by accelerating regional initiatives and actively participate in
designing the new global financial architecture," he said.

While there are signs of improvement in G3 economies (US, Japan and European
Union) in the second quarter, weak and uncertain global economic conditions have
led to a lowering of growth forecasts for 2009.

ADB's March Asian Development Outlook (ADO) forecast a three per cent growth
rate for emerging East Asia for 2009.

Since then, downside risks to the outlook have increased in a number of
economies, including Hong Kong, Malaysia, the Philippines, Taiwan and Thailand
while there are upside risks to the 2009 outlook for China and possibly
Indonesia, said AEM.

The report also said that before emerging East Asia, which includes Asean,
China, Hong Kong, South Korea and Taiwan, can return to the levels of growth
seen in recent years, industrialised economies must recover sufficiently to
rekindle demand for the region's exports.

It said the US, Japan and Europe remained major markets for Asian exporters.

"Trade within emerging East Asia has grown rapidly in recent years but it
remains largely based on parts and components rather than final goods.

"The region has yet to provide final demand for its own exports," he said.

As a result of only a modest recovery projected in 2010, the region's
external demand would not pick up soon, and the region's export recovery would
largely hinge on how quickly major industrial countries recover, it added.
-- BERNAMA