Asian Economic Outlook 2004
1st Quarter Report
January 13, 2004
Nomura Research Institute, Ltd.
Asian Economies Research Unit
The Asian economies continue to stand on firmer ground. External demand is recovering on the robust economies of the developed countries. Domestic demand of China and the ASEAN continue to be strong and even the Asian NIEs are retrieving their recovery paths. As various elections are scheduled in some countries in the coming year, we should consider the impact of the elections on the financial market and the economy.
Though private consumption and capex remain sluggish, external demand is expanding favourably. While political confusion lingers, it seems to be peaking and we believe bad news will soon be exhausted. We downgrade the growth rate forecast, but we still stick to our recovery scenario for 2004.
Exports continue to be strong and it looks feasible to achieve near 5% y-y growth in Q4 alone, depending on the growth in private consumption. We raise our growth forecasts for 2003 and 2004 to 3.1% and 4.0%, respectively, considering factors such as the steady expansion in exports, the recovery in consumer confidence and the speeding-up of public investments including infrastructure projects.
We revise up our real GDP growth forecasts for 2003 and 2004. The current economic recovery is stronger-than-expected and there are signs that the recovery in domestic demand may further accelerate in 2004. External demand may also continue to be robust. Though deflation continues throughout 2003, we believe prices will rise in 2004.
We raise real GDP growth forecast for 2003 and 2004. In 2004, the Chinese economy should see a healthier growth pattern - exports and investment may slow and the overheating in some sectors may subside, while private consumption accelerates. Deflation should come to an end in 2003. The trade surplus may shrink due to strong imports arising from robust domestic demand.
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