Economy slowing down, says Japan

By Amit Baruah

SINGAPORE, NOV. 13. It's official. The latest to join the ranks of the ``doom and gloom'' countries is Japan. Tokyo has admitted that its economy will contract by 0.9 per cent in fiscal 2001 as opposed to a projected growth rate of 1.7 per cent.

With Japan joining the ranks of countries going into the red, the state of the country's economy is likely to impact on the rest of East and South-East Asia. Reports of job losses and salary cutbacks seem to have become a routine development as the Asian Development Bank reported that growth in the Asia- Pacific region will drop to 3.4 per cent in 2001.

According to the ADB, the impact of the September 11 terrorist attacks in the United States will delay the global economic recovery to around the middle of 2002. ``Terrorist- related events are still unfolding. There is a high level of uncertainty in the global environment and the economic outlook is changing by the day...'' the Manila-based institution said.

The Bank pointed out that developing Asia would continue to be one of the world's fastest-growing regions this year - robust growth in China, India and other less developed countries would help offset the weaker performances of what it calls newly- industrialised and other economies. According to the ADB, the economic performance of its member-countries had varied greatly this year with growth projections for newly- industrialised economies marked down sharply, South-East and South Asia less so and China remaining unchanged.

The Bank said the September 11 attacks, coming on top of an already weakening economy, abruptly disrupted U.S. economic activity and significantly increased uncertainty. ``The quantitative impact is hard to gauge though estimates of insurance losses and compensation due to the destruction of physical and human capital alone will probably add up to nearly $100 billion. On the higher side, the United Nations estimated that the economic losses go up to $350 billion worldwide or about one per cent of global output,'' it said.

In East Asia, exports already weakened will be further hit. As a result of higher insurance and security costs, passenger and freight unit costs are expected to rise. ``Commodities prices in general have weakened. Cheaper world oil prices, stemming from weakened demand, however, will help heavily oil-dependent countries such as the Republic of Korea and India.'' it said. Tourist-dependent nations like Sri Lanka, Indonesia, Thailand and Fiji will suffer a slowdown, the Bank stated.

While projecting an economic recovery from mid-2002, ADB said there was potential for a downward spiral of trade and faltering confidence in which all engines of growth would stall, although this was an unlikely scenario. ``In the United States, terrorist- related uncertainty could further undermine confidence, prompting a reversal of financial flows, a sharp contraction of the current account deficit, and disruptive exchange rate correction causing market turmoil and reduced import demand.''

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Section  : International
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