Survey Shows Uneven Recovery in Asia;
Progress Is Seen for Korea and Thailand

By G. PIERRE GOAD
Staff Reporter of THE WALL STREET JOURNAL

HONG KONG -- A few Asian economies are starting to pull away from the pack in the long, slow climb to recovery, according to the latest monthly survey of forecasts by Consensus Economics Inc.

After a long streak of across-the-board monthly downgrades of growth projections, economists are spicing their regional forecasts with a handful of modest upgrades. The change in direction is more important than the numbers themselves, and it shows that the Asian crisis is entering a new stage where broad generalizations no longer apply.

The forecasts suggest that some countries are going to do better than others in the months ahead. If those predictions are accurate, the next phase of Asian growth could differ significantly from the 1990s, where economies soared and then crashed together.

Korea's Outlook

The most notable improvement in sentiment is in South Korea, where the consensus forecast for 1999 growth inched back up to 1% this month, compared with 0.5% in December and a low of -0.3% in October. The 1999 outlook for Thailand has also improved, with the consensus forecast now at zero, compared -0.1% in December and -0.4% in October.

The outlook for some economies continues to darken, however. In Japan, economists now expect real gross domestic product to shrink 1.1% this year, compared with the December consensus forecast of a -0.6% contraction. Economists also shaved slightly their 1999 predictions for Singapore and Taiwan, Consensus Economics, a London financial-information concern, said in its January survey.

In 2000, every Asian economy should grow, though the consensus forecast for Japan is for a slim 0.1% uptick in real GDP. South Korea and Thailand are expected to grow 3.5% and 3.3%, respectively. Malaysia and Indonesia will trail behind at 2.7% and 2.3% growth, respectively. Hong Kong's economy is expected to grow 1.9% in 2000, slower than all its neighbors except Japan.

The region as a whole, including Australia and New Zealand, is expected to grow 1.5% in 2000, compared with 0.2% this year and 1.9% contraction in 1998. Southeast Asian economies as a group are expected to register growth of 2.8% in 2000 after contractions of 1.1% this year and 7.6% in 1998.

Year of Stabilization

The consensus forecasts underscore that 1999 is a year of stabilization. A recovery in most Asian economies won't get under way until later this year or in 2000. Of course, measuring only the percentage change in economic output overstates the health of the region's economies. In many cases total output won't reach 1996 levels until 2001 or later, reflecting the savage contractions in 1997 and 1998.

The survey also shows Asia's great export rebound will remain a myth for the next two years. Economists have finally given up on the notion that exports will pull Asia out its recession. The country forecasts signal only modest improvements in exports this year and next. That reflects expectations of slower economic growth in the U.S. and Europe and a continuing recession in Japan.

Asian nations will see some improvement in export demand from their neighbors, however, as crisis-stricken economies stabilize, says Jim Walker, chief economist at Credit Lyonnaise Securities. However, putting recovery on a firm footing will depend largely on a revival of domestic consumption and that in turn depends in part on rebuilding banking systems and other structural reforms. "In order to keep the recovery going the region needs to do more domestically," Mr. Walker says.