(3 of 4)
HONG KONG. Since the U.S. market has become less inviting, Hong Kong has turned to China to take up some of the slack. The British colony's direct exports to the People's Republic totaled $1 billion during the first six months of the year, up more than 40% from the same period of 1984. But Economist Chen pointed out that this trade could be hurt by China's new restrictions on imports. He said that Hong Kong's current 4.5% growth rate would show no improvement in 1986.
TAIWAN. Already reeling from a drop in exports to the U.S., Taiwan's economy was rocked this year by the collapse of two financial divisions of the giant Cathay conglomerate. The affair has shaken business confidence and hurt investment. Taiwan's 4.2% growth rate this year is weak for a country that averaged 9% annually between 1970 and 1984.
To get Taiwan moving again, the government is launching 14 huge capital construction projects, including a subway system in Taipei, several hospital complexes and a steel mill expansion. Economist Chen predicted that these initiatives would help lift Taiwan's growth to about 5% next year.
ASEAN. Singapore is ordinarily the supernova of the Association of South East Asian Nations, but this year its glow has almost gone out. Its .5% growth rate has come as a shock and an embarrassment to Prime Minister Lee Kuan Yew, who has cut taxes and utility costs and accelerated work on Singapore's new mass-transit system. His program, said Board Member Narongchai, could boost the country's growth to 2% next year.
Several less developed ASEAN countries, including Thailand, Malaysia, Indonesia and the Philippines, are hurt by low prices for many commodities they export, including palm oil and sugar. Said Narongchai: "The way prices are moving, people feel that we might as well dump our commodities into the Pacific Ocean."
TIME's economists forecast that growth in Thailand, Malaysia and Indonesia will stay stuck in the 3%-to-5% range through 1986. The most troubled ASEAN nation will continue to be the Philippines, where the economy is contracting by 5% this year. The regime of President Ferdinand Marcos has stirred political unrest and damaged business confidence. Economist Bernardo Villegas, senior vice president of the Philippines' Center for Research and Communication, predicted that the country will eke out a 1% growth next year, but only because Marcos will pump money into the economy for next January's election. That is not likely to have lasting effects. Said Villegas: "The investment climate will continue to be negative as long as Marcos is around."
AUSTRALIA. Since 1983, Australia's annual growth has been a solid 5% to 6%, and unemployment has fallen from 10% to 8.1%. But the expansion has stimulated imports and increased the trade deficit, which hit a record $364 million in October. The deficit has driven down the value of the Australian dollar and doubled the inflation rate, to about 8%. As prices have risen, interest rates have climbed to the 18% range.
Nonetheless, Peter Drysdale, executive director of the Australia-Japan Research Center at the Australian National University in Canberra, predicted that the country will maintain a 5% growth level in 1986. He noted that the government had persuaded major trade unions to accept wage increases next year that will be two percentage points less than the inflation rate. That could take the pressure off prices.