By Ian Perkin

Speakers during the final forecasting session of the 2001 APEC (Asia-Pacific Economic Co-operation) Economic Outlook Symposium were surprisingly upbeat about the outlook for the United States and Asia-Pacific region economies when they gathered in Hong Kong on June 28-29.

The overwhelming consensus view was that the U.S. economy is now going through its worst period and that by year's end it would be well on the way to recovery, driven by good consumer demand, interest rate cuts and tax rebates. This positive outlook for the U.S. would, in turn, have a positive impact on the Asia-Pacific region, especially export-driven economies of East Asia.

It was left to one of President George W Bush's newly appointed economic advisers, Will Melick, to raise questions about the rosy outlook suggested by the symposium's other speakers. Just eight days into the job as senior economist with the Bush Administration's Council of Economic Advisers, he suggested there were four uncertainties that could adversely affect the outlook.

First, while admitting that the interest rate cuts would be ultimately beneficial to the U.S. economy, he questioned how long it might take for them to have an impact. He said that in the new economy there were still questions over how long and variable were the lags between interest rate cuts and their economic impact.

Second, he said the Bush tax cuts would also be bene-ficial, but would depend on whether consumers elected to spend them on immediate consumption. Third, he said there had to be a question-mark over the performance of U.S. equity markets, especially with so many negative profit forecasts now emerging form U.S. companies.

Fourth, he added that in a weaker economy, the forces of protectionism were harder to resist and cited in evidence the U.S. action against steel imports and the current trade dispute between Japan and China.

These thoughts apart, the general view was positive. Kunio Saito, the International Monetary Fund's (IMF) Tokyo-based director for Asia and the Pacific, said the current slow down in the U.S. and elsewhere would be short-lived and that fears of another recession or financial crisis in the region are unfounded.

He said things would worsen a little further, but would improve by year's end. He predicted that China and India would continue to enjoy high rates of growth of between 6 and 8 per cent, that Japan would have low growth of zero to 2 per cent and the other countries in the region, including Hong Kong, would see growth between these extremes.

Merrill Lynch Research Director Stan Shipley was also upbeat, suggesting that by the first quarter of next year the U.S. economy would again be growing at a 4 per cent annual rate, pushed along by monetary and fiscal stimulus, as well as consumer confidence. He said the middle six months of this year would be weak, but that there would be recovery from then on.

Wang Tong-san of China's Academy of Social Sciences, spoke confidently of China's growth prospects, predicting that a 7.5 per cent GDP growth is achievable this year, with overall investment up 8 per cent, exports growing at the same rate and imports rising 12 per cent for the year.

He said first quarter growth was 8.1 per cent and the first half would be at least 8 per cent and, although there might be some easing in the second half, 7 per cent plus growth for the full year was achievable.

Finally, on the Hong Kong SAR outlook, Standard Chartered Bank's K C Kwok said that Hong Kong would be hit by the cyclical slowdown world-wide, but that its trade was less affected than others in the region, because of its greater diversity.

He said the strong U.S. dollar made things a little more difficult for Hong Kong, with its own dollar tied directly to the U.S. currency. But he said the cuts in U.S. interest rates, which are also followed in Hong Kong, would also be positive for local growth.

He said more important for Hong Kong were the structural changes it was undergoing. These included the future role of the Hong Kong SAR regarding Mainland China and its evolving role in the East Asian region. He said the SAR's stronger economic links with the Mainland economy were becoming more apparent and would have an important impact on its future development.

Other issues Hong Kong would have to come to terms with included the further expansion of tourism and financial services, the development of its port and logistics infrastructure, and its own domestic political development within the framework of 'one country, two systems.'

In a separate announcement on July 3, the APEC Study Group at Hong Kong University and the Better Hong Kong Foundation, issued the latest results of the High Frequency Economic forecast for the SAR, again showing a better than expected immediate outlook for the economy.

The survey, which is updated every quarter, suggested the economy would grow by a fairly rapid 3.3 per cent in the second three months to June and 3.5 per cent in the third three months to the end of September. These suggested outcomes compare with just 2.5 per cent actual growth in the opening quarter of the year.

The APEC/ Better Hong Kong forecast, although technically well modelled, is also getting a reputation for regularly over-estimating the economic growth outlook. For the first quarter of this year, for example, it suggested growth would be 3.3 per cent when it actually came in at 2.5 per cent.