Asian Economic Outlook 2003-2004
2nd Quarter Report
May 8, 2003
Nomura Research Institute, Ltd.
With the fighting among Iraq, US and UK almost coming to an end, the risk that Asian economy would be affected by the war has become little. On the other hand, attention has been focused on impacts arising from the problem of SARS. In addition to the negative effects such as the drop in tourists and the sluggish consumer demand, there are worries that it will force down the operation of export companies. As things stand, SARS is the main variable and our forecasts will be subject to revision as and when the situation becomes more clear.
Business confidence continues to worsen. At this point, SARS' temporary impact towards tourism and private consumption is trivial and we can expect a positive effect of the drop in crude oil price boosting the trade income. The bond market had been confused by problems of the credit cards and the failure of SK Global. Its effects on the directions of corporate reforms are to be watched.
SARS poses a serious blow towards tourism related industries which leads to a further drop in business confidence. However, as the number of infected cases in Taiwan is few, we expect that the problem will be solved at a comparatively early stage. We think the negative impact towards 2003 GDP growth remains at around 0.1%.
SARS' impact on tourist receipts, private consumption and service exports is estimated to be significant. Thus, we revise down our 2003 real GDP growth forecast from 3.2% to 1.5%.
We revise our 2003 real GDP growth forecast from 7.5% to 7.8%. This is because the growth rate of 1Q03 was stronger than expected, despite we expect there would be negative impact arising from SARS.
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