SINGAPORE: An economic slowdown in China, a rise in US interest rates, and surging oil prices will not be enough to scuttle robust South-East Asian growth this year, investment bank Morgan Stanley said.
China's slowdown could, however, have its full impact on the region in 2005 and was the most serious risk to growth that year, it said in a report.
“China's slowdown, an imminent (US) Federal Reserve rate hike and a continued surge in oil prices are three wild cards confronting South-East Asia's cyclical growth prospects,” the report said.
“In our opinion, none of these wild cards seems potent enough to debilitate South-East Asian growth in 2004. Still, a sustained oil price surge coupled with a China slowdown could prove to be a bitter pill to swallow,” it added.
Oil prices could possibly ease and regional central banks were expected to follow the US lead to raise interest rate only later in the year, leaving the Chinese threat as the most serious challenge to the region's export-oriented economies, it said.
“With the thrust of that impact (of China's slowdown) lying squarely in 2005, we think it is safe to say that our 2004 estimates are robust but we are keeping our fingers crossed for 2005,” Morgan Stanley said.
Singapore's economy grew 7.5% year-on-year in the first quarter, with Malaysia turning in 7.6%, Thailand 6.5%, Indonesia 4.5%, and the Philippines a surprising 6.4%.
“This makes our 2004 forecasts for South-East Asian countries look extremely robust and we believe there may be room for further upgrades in the case of Singapore, Malaysia and the Philippines,” it said.
Morgan Stanley is forecasting 6.4% growth for Singapore this year, 5.7% for Malaysia and 4.5% for the Philippines. For Indonesia, it expects growth of 4.5% and Thailand 7%. – AFX-Asia