Terrorist attacks likely to set back Asia economies: S&P

Asian Economic News, Sept 24, 2001

TOKYO, Sept. 21 Kyodo

The terrorist attacks last week in the United States have raised the dual specter of recession and war and are likely to set back Asian economies, Standard & Poor's Corp. (S&P) said Friday.

The U.S. credit-rating agency said the turnaround of Asian economies, many of which were already in recessions brought on by a downturn in technology exports, is now likely to be delayed until next year as the awaited boost from a recovery in U.S. demand has been pushed back.

''We have subtracted a few tenths of a percent from projected 2001 annual gross domestic product (GDP) growth for a number of Asian economies, largely on the anticipated drag upon U.S. demand for imports,'' S&P said in a statement.

The agency said the extent of the drag will likely depend on the magnitude and duration of the downturn in the U.S., with further uncertainties surrounding the awaited military response by Washington.

''The potential for it to trigger a spiral of violence, leading to disruption to the flow of oil, is always capable of global economic repercussions,'' it said.

Among Asian economies, S&P revised downward sharply its GDP forecast for Hong Kong for 2001 to minus 0.1% from 1.0%, reflecting incorporation of a weak GDP figure for the second quarter of this year.

But it left its GDP projection for Japan unchanged at minus 0.8% for 2001 as the drag from the attacks will balance the report of April-June GDP at a minus 0.8% quarter-on-quarter, slightly stronger than its projection of minus 1.0%.

S&P also said the lower global interest-rate environment in the wake of the attacks will help head off a more serious downturn.