E. Asia economies will be hopping in '87. `Year of Rabbit' should see slight upturn even in the Philippines
Tokyo — This year, by the Chinese zodiac calendar in vogue throughout East Asia, is the year of the rabbit. And that prodigiously multiplying creature is the appropriate symbol for a year that promises to bring growth for the region's developing economies. The region's economic stars - South Korea and Taiwan - should continue to shine brightly. Meanwhile, their more troubled neighbors, particularly the still turbulent Philippines and oil producers Indonesia and Malaysia, can expect the beginnings of an economic turnaround.
Those are the predictions of Japan's leading experts on those nations at the Institute of Developing Economies. The institute is a government-funded think tank closely linked to the powerful Ministry of International Trade and Industry, better known simply as MITI. Not only the government, but Japan's leading corporations, draw upon think tank's expertise to guide their trade and investment policies.
The picture drawn by the institute's economists is a welcome one. The past two years have been characterized by generally poor economic performances, with only a few exceptions. This is uncharacteristic for a region that has outstripped the rest of the developing world in achieving sustained growth over the past one or two decades.
The Philippines has been the region's economic weak point for the past three years. High inflation and a contracting economy - minus 5.9 percent in 1984 and minus 4.0 percent in 1985 - accompanied the political turmoil leading up to the overthrow of Ferdinand Marcos's dictatorship last year. The new government of President Corazon Aquino, the Japanese economists say, has been fighting an uphill economic battle.
``Though manufacturing industry output remains low,'' the institute says, ``the economy has hit a bottom.'' The Aquino government has ``brought a certain degree of stability to the rural areas,'' producing agricultural exports and a boost in household spending. The 1986 figures, they estimate, will show a growth rate of 0.5 percent. This year, they say, will show real growth of 3.8 percent.
``The precondition for positive growth,'' says an economist with the think tank, Hiroshi Osada, ``is political stability.''
``If the Aquino government is successful in negotiating with the left and in carrying out the constitutional referendum,'' Mr. Osada continues, ``then the economy can stabilize. Our forecast basically assumes Aquino will succeed.'' Without such stability, he says, countries and international lending institutions will be reluctant to give more economic aid. Such public investment, the institute's report concludes, is needed to restore confidence and ``prime the pump of private investments.''
Similar modest recoveries can be expected in several other Southeast Asian nations, the Japanese foresee. Indonesia and Malaysia, two countries that suffered from a drop in their revenues from crude oil exports due to the sharp decline in oil prices, have had to take harsh austerity measures.
Indonesia devalued its currency by 45 percent last September. With a slight rise in oil prices and good management, the institute says, modest growth of 2.9 percent for Indonesia and 1.7 percent for Malaysia can be achieved (both countries experienced negative growth during the past two years).
At the other end of the spectrum are countries that have boomed through the export of manufactured goods, mainly to the United States, but also to Western Europe and even to Japan. South Korea, which had slumped somewhat in 1985, had a banner year last year, with a real growth rate estimated at 10.8 percent. The drop in oil prices was a great factor, along with low interest rates. The key was exports, which jumped nearly 30 percent, thanks to the low price of South Korean goods relative to those of Japan - which went up because of the yen's huge upward revaluation.
The institute's economists expect that South Korea's torrid pace will slacken somewhat, to 7.2 percent real growth. They envision the impact of foreign pressure for an appreciation of the value of the South Korean currency, which will make their exports more expensive, and for protectionist barriers. Seoul is more optimistic, predicting 12 percent growth in 1987.
The institute also has praise and an optimistic outlook for the economies of Thailand and Taiwan.
Thailand, traditionally a producer and exporter of farm products such as rice and corn, has been benefiting from a leap in exports of manufactured goods. This more than compensated for a slowdown caused by a drop in grain prices, increasing growth to an estimated 5 percent this past year, with a forecast of 5.3 percent for 1987. Taiwan, like South Korea, the institute says, will slow slightly from 9.3 percent growth in 1986 to 7.9 percent in 1987.