Ten Thriving Markets Poised for Growth

errill Lynch sees the

Asia-Pacific economies poised to continue their strong
growth in 1992 even
as they contend with the problematic by-products of that growth and
an uncertain world environment for
trade and investment. Combined,
the ten major Asian economies outside of Japan should post an average real GDP growth of 6.5% this
year compared to 5.2% in 1991, with
no less than seven experiencing an
increase in growth over last year.
Rising wages, infrastructure
bottlenecks, high inflation and
external deficits mar the picture in
some economies. Tenuous market
conditions outside the regiop
threaten to dampen demand for
Asia-Pacific exports and curb investment into the region. For the most
part, the economies are addreSSing
their internal problems. Global uncertainties are being met by efforts
to build new export products and
by boosting intra-regional trade.
In Merrill Lynch's view:
Hong Kong: The start of
Hong Kong's HK$127 billion
pOlt/airport project should help
ensure strong real GDP growth in
1992-~errill
projects an impressive 7.10/tl--7aJJ.d-beyond. Export
growth should accelerate this year to
22-23%, provided the US recovery
moves into higher gear and US-Sino
relations including China's most
favored nation status remain intact
as expected. Rising wages should
push inflation up to 12.7% in 1992.
But the prime rate will stay well
below inf1ation. A strong recovery in
corporate earnings is also a plus.
Singapore: Mter four years
of near double-digit growth, real
GDP growth in Singapore may drop
to 5.1% in 1992, dowrl\from 6.7% in
1991. Even so, fears of a severe
slowdown are overblown. Economic
cushions and policy levers, including a 47% savings rate and strong
fiscal pOSition, exist to prevent a
harsher decline. Falling inflation,
low interest rates and a stable wage
growth should see comsumption

stay healthy. Exports should pick

up with the global recovery.
Business' efforts to regionalize
should also propel growth.
Taiwan: This may well be
the best performer in the region,
with real GDP growth projected to
rise to over 8% in 1992, up from .
7.3% in 1991. Domestic demand
surged last year; external demand
was also high. A larger external surplus, soft interest rates, low inflation
and fUlther liberalization of capital.
flows are other factors that wm fuel
economic expansion. Taiwan's
export growth will remain strong.
Malaysia: This country is
taking a much needed breather in
yconomic expansion, as the government wrestles with infrastructure
problems, rising inflation and an
external deficit. A tighter monetary
policy deployed in mid-1991 has
begun to take affect. Consumer
spending has slowed and recent
inflation figures have been lower
t1un expected. Even so, large wage
increases will probably still push
up inflation in 1992, while the current account deficit will climb. Bpth
should subside in 1993 just as--GDP
gro')'th reaccelerates.
Thailand: This economy
continues to surge. Real GDP
growth in 1992 should average 8-to8.5%, up from 7.9% in 1991. Higher
domestic consumption, fueled by
cuts in personal taxes and big wage
increases, along with infrasm:r~rerelated investment will likely be the
main forces driving economic
growth this year. Two potential
trouble spots continue to be inflation and a large external deficit.
SOUtilKorea: High inflation,
a large extemal deficit and imbalances between economic sector
performances should stifle growth
this year. Men-illprojects real GDP
growth to sink to 7.1%, down from
8.5% in 1991. Strong consumption
spending and a rise in budget outlays in fiscal 1992 will likely push
inflation into double-digit territory.
A large savings-investment gap will
keep interest rates high. Import
growth is declining, while export

performance needs improvment.

Indonesia: After a marked
slowdown in GDP growth in 1991,
economic expansion should begin
to reaccelerate in 1992 to 6.2%. The
new budget is skewed toward infrastructural development and new fiscal measures are geared to raise
more public revenues. Meanwhile,
the government's tight monetary
policies eased inflation to 8.8% in
January compared with an average
9.4% rate in 1991. After June parliamentary elections, lower inflation
and a stable external deficit could
lead to a reduction in interest rates.
The Philippines: The country could see 'its economy pick up
marginally this year. Merrill projects
real GDP to grow by 2.3% in 1992"
after contracting by 1% last year.
Fixed investment, the primary culprit in the downturn, may begin to
turnarouncllater this year. A drop in
inflation could spur consumption
spending, while the IMP's recent
endorsement ensures that inflows of
external financing will continue.
Interest rqtes, too, should tumble.
India: The reform movement is fueling economic improvement in 1992. Real GDP growth
should climb to 4.6% in 1992, up
from 2.7% in 1991. Inflation, interest
rates and India's external deficit
should begin to decline, while exports will likely grow more quickly
in 1992. Continuing double-digit
inflation may accompany these positives, which could invite money
tightening. Now that easier reforms
have been completed, the government must show tl}e will to push
through more difficult changes.
China: Relative political stability and greater efforts to promote'
reforms should benefit China's
short-term outlook. Real GDP'
growth rebounded to 7.1% in 1991,
and should advance further to~9-to9.5% in 1992. Inflation remains a
concern, but such factors as a cautious monetalY stance should keep
price increases to a manageable 1010.5%, from 3.5% in 1991. China's
external payments position should
remain strong through most of 1992.