Some of the most salient points about each economy are given below:

Singapore

Badly hit due to heavy concentration on electronics and intra-regional trade. Gov't will likely introduce off-budget measures to bolster economy. GDP growth forecasts revised down to about 2% this year. Next year's outlook in H1 hinges on electronics pick-up, which does not look positive currently. There are serious efforts on the part of authorities to adjust the FDI/MNC strategy which has been the formula in the last several decades. Shift to SMEs and China niches are part of structural changes.

Malaysia

The poor Q2 GDP numbers for Spore suggests that Malaysia's electronics sector will be hit badly. This together with the over-valued riggit and political uncertainties will lead to growth of about 1.5 - 2% this year. The stock market is one of the worst performing markets in the region this year. There are however, some signs that the economic pressure is forcing more restructuring this time around. Oil palm which is one of the biggest export items, have seen record low prices, but recently there are tentative signs of revival. Gov't spending will rise significantly but little chance of offsetting the export downturn. Domestic capital flight is still the greatest threat and this risk rises if the Yen weakens to 135-140.

Indonesia

Everyone is waiting for politics to become more clear after Whaid's impeachment. Chances are that Megawati will come into power but the political wrangling will not end. IMF returning to the country with a new program soon. Street violence may pop up now and then but a serious implosion will unlikely occur. Economics not hit by electronics downturn but by political uncertainty and weak Japanese demand. Muddle along situation for Indonesia but a floor of 2% growth this year.

Philippines

While politics is now more positive and the important Power Bill has been passed, the drag from the accumulated fiscal deficit and the heavy reliance on the electronics sector will pull growth down. Still there is a floor provided by the steady inflow of remittances and the agriculture sector. In terms of GDP growth 2% this year.

Thailand

Thaksin related political concerns, the "old" banking problems and weak export markets will pull down growth. Unlike the previous cycle, there is less pressure from external debt as a big chunk of this has been paid back. Also not too heavily reliant on electronics. Tourism, auto parts exports and agriculture will help somewhat in underpinning the growth rate this year. Expected GDP growth about 2.0%.

China

China's domestic demand remains strong and there is no sign that this would change in any significant way. In the first 5 months of this year, retail sales value grew by 10.3% while investment spending grew by 17.6%. Export growth has been slowing down (but at 13.2% in the first 5 months of 2001, China's exports have performed very well vis-a-vis other economies in the region) and this has affected industrial production growth somewhat (but this is still up 11% in the first 6 months). The economy has been growing at an 8% pace and is likely to continue at this rate in the second half.

Hong Kong

The export slowdown in less dramatic as the weight of electronics/IT is much lower. Export value fell by 3% in April-May (up 2.2% in Q1). But the 3% drop is a reflection of the fall in export prices as the latter is falling at roughly a 3% rate. Order numbers suggest that this drop in exports is likely to continue. The strength of the USD (and hence the HKD & RMB) is also making life difficult for exporters who sell to European and Japanese markets.

Domestic consumption demand remains sluggish. But retail sales numbers have improved recently (volume numbers are up 3.5% in April-May as compared with +1.7% in Q1). It has yet to be seen whether consumer spending could hold up, given the gradual increase in the unemployment rate. But on the other hand, activities in the residential property market have shown some signs of improvement recently. Much will depend on how the global economy evolves in the coming weeks and months.

Overall, our forecast of 3% growth for the year remains, at least in the mean time.

South Korea

Exports fell 10.5% in Q2 (up 2.1% in Q1). But much of this fall in exports is due to the dramatic fall in export prices (export prices fell by about 10% in the first 4 months). In volume terms, the export picture is not as bad as the value figures show. But while this means that the GDP numbers would look better, the impact on Korean corporates is as bad as the value numbers because it is money in the pocket that counts.

Domestic sentiments improved a bit in the past few months in anticipation of a rebound in the US in the second half of 2001. Whether this is wishful thinking is a side issue. But such sentiments helped underpin consumption spending. Investment numbers however remained weak.

GDP growth was 3.7% in Q1 and it is likely that the GDP number for Q2 will remain positive. We are revising the full year GDP forecast slightly downwards, from 3.5% to 3%. But the real problem for South Korea remains the same -- how to continue restructuring Korean Inc. The job is made more difficult now, given the bad economic situation. The government is still using the banks and other vehicles to bail out uncompetitive firms.

Taiwan

It is likely that Taiwan will have negative economic growth in Q2. Our growth forecast for the full year has been revised downwards further, from 2.5% earlier to 1.2%.

Exports fell 17% in Q2 (-3.6% in Q1). Imports also fell by 22.8% in Q2 which reflects the weakness in domestic demand, in both consumption and investment. Given the 7% fall in both export and import prices, the volume falls are not as serious as the value numbers. Capital equipment imports fell 24.7% in Q2 (down 13.2% in Q1) and consumer good imports fell by 6.1% (down 7.3% in Q1). Retail sales value also fell 4.5% in April (-1% in Q1).

A trade surplus of US$ 3.3 bn was recorded in Q2 (about the same as Q1). But the positive effect of this on the balance of payments is likely to be offset by capital outflow due to the uncertainties in economic prospects.

Politics (both domestic and cross-Strait) remains a difficult subject. The medium term economic challenge is how to deal with a situation when more and more investors move to Mainland China.