News Release:20031015

Asian Economic Outlook 2003-2004
4th Quarter Report

October 15, 2003
Nomura Research Institute, Ltd.

Regional Overview

We believe momentum is gathering for a recovery in the Asian economy, owing to an improving external environment, expressed as: (1) upside in Asian stock markets, as supported by the rise in global stock prices; (2) an increase in exports; and (3) an early restoration of cross-border visitor numbers. Meanwhile, in preparation for the US presidential election in November 2004, the US government is exerting greater pressure on China and other parts of Asia which possess a substantial trade surplus with the US, against the backdrop of a slow recovery in employment in the US.

South Korea

Although the economy seems to have hit the bottom, the recovery still appears slow, owing to factors such as labour disputes, political disruption and the impact of the recent typhoon. We believe the government¡s countermeasures are insufficient, and cut our economic forecast.

Taiwan

Since the start of 2H03, the economic recovery has been accelerating, as illustrated by export and production statistics. Meanwhile, consumer confidence and stock prices have improved substan- tially, and the number of visitors from Asia is at about 90% of the pre-SARS level. Considering the upturn in the global economic environment, we raise our real GDP growth forecasts to 2.9% for 2003 and 3.7% for 2004.

Hong Kong

We raise our real GDP growth rates for 2003 and 2004. The 0.5pp drop in 2Q real GDP growth was smaller than we anticipated, on better-than-expected export performance, owing to expectations for a strong increase in the number of mainland tourists. The pace of recovery in private consumption is faster than we previously forecast.

China

We raise our estimate for real GDP growth in 2003 and 2004, owing to stronger-than-expected exports and investment. However, we expect the economy to decelerate in 4Q, since the government appears to be trying to tighten its monetary and real estate investment policies.

ASEAN

Singapore:	We believe improvement in the external environment this year will occur faster than we expected. Consequently, we raise our 2003 growth forecast to 1.2% from 0.6%. We maintain our growth forecast at 4.4% for 2004, since we expect the effects resulting from the improvement in external environment will be offset by the effect of the reduction in income following the change in the Central Provident Fund (CPF) system.

Malaysia:	Second-quarter GDP growth came in at 4.4% y-y. Considering the upward revision of assumptions for the external environment and a supplementary financial expenditure policy totalling RM4.5bn, we revise our 2003 growth forecast to 4.7%. Though 2004 should see continuous improvement in the external environment, we stick to our 5.2% growth forecast, since the country’s fiscal policy appears to be shifting towards a neutral stance.

Thailand:	The growth rate in 2Q was maintained at 5.8% y-y, despite the impact of SARS. We raise our 2003 growth forecast to 5.8% (previous 4.9%), given that the current economic momentum could be maintained through: (1) private consumption; (2) private investment; and (3) exports.

Indonesia:	The first-half growth rate was a resilient 3.6%. We forecast growth of 3.7% in 2003 and 4.3% in 2004. The current level of exchange rates should continue until end-2003, taking into account rising pressure on the rupiah, from the disposal of IBRA’s assets, among other factors. We expect the rupiah to continue weak in 2004, and believe it is important to pay attention to political trends.

The Philippines:	Despite the upturn in private consumption, 2Q growth decelerated to 3.2%, with public and external demand dragging down the economy. We foresee improvement in the economy, driven by private consumption, and expect the exchange rate to be at P54-55/US$. The political focus will likely be on whether President Arroyo runs for president in the next election.

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Inquires to: Economic Research Department, Nomura Research Institute
Telephone. 81-3-5255-1800

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