Other areas - Asia and Latin America - Developments in Selected Non-OECD Countries

OECD Economic Outlook, June, 1993

Growth in other non-OECD economies generally is holding up better than in the OECD and in Central and Eastern Europe. Recovery is expected to continue in Latin America, and while growth has slowed in Asia, it remains brisk. Intra-regional trading links seem to be strengthening, helped, by market-opening policies. At the same time, one important reflection of the dynamism of non-OECD countries in Latin America and Asia is that they are becoming ever more important trading partners for OECD countries.

Dynamic Asian economies and China

Growth in the dynamic Asian economies (DAEs: Korea, Taiwan, Hong Kong, Singapore, Thailand and Malaysia) slowed to about 5 3/4 per cent in 1992. While this compares very favourably with the performance of OECD countries, it was significantly below the 7 1/2 per cent growth rate recorded from 1989 to 1991 and the 8 per cent average rate during the past 25 years.

Their economies are projected to expand by about 6 1/2 per cent on average in 1993 and 1994, aided by the recovery in the United States and continued expansion in China, which has become an increasingly important market for their exports. Hong Kong and Taiwan's exports to China each increased by more than 30 per cent in 1992, while Korea's more than doubled. Rapid growth in China, though, has produced signs of overheating, and monetary policy has been tightened somewhat.

Growth in 1992 was below the apparent sustainable rate consistent with non-accelerating inflation, which now appears to be between 6 and 7 per cent for the DAEs as a group, with wide differences across economies. It is likely to be highest in the relatively less-developed economies of Thailand and Malaysia, while in Taiwan and Korea it may have fallen below the 7 and 7.5 per cent rates projected in their current five-year plans(4). The pickup in the DAEs' average growth rate to a 6-7 per cent range in 1993 and 1994, however, is unlikely to lead to an acceleration of inflation.

The combined current account of the DAEs is projected to remain in balance in 1993 and 1994. The swing from large surpluses in the late 1980s to a small deficit in the early 1990s had as its origin sharp increases in wages in the DAEs, particularly Korea, that made these economies less competitive internationally and fuelled a sharp expansion of consumption expenditures. The appreciation of the yen in the first half of 1993, though, should make the DAEs' exports more competitive in Japan's domestic and export markets.

Table 29. Dynamic Asian economies: key economic variables(a)
                          1991   1992   1993   1994
DAEs' Total
GDP/GNP(b)                 7.5    5.7    6.4    6.9
Consumer prices(b)         7.1    4.9    5.0    5.0
Trade balance             -3.6   -2.0   -2.2   -2.5
Current-account balance   -3.0   -0.9   -0.3    0.0
Korea
GNP                        8.4    4.7    6.0    6.5
Consumer prices            9.3    4.5    5.0    5.0
Trade balance             -7.0   -2.2    0.0    1.0
Current-account balance   -8.7   -4.6   -3.0   -2.0
Taiwan
GNP                        7.2    6.1    6.5    7.0
Consumer prices            3.6    4.5    3.5    3.5
Trade balance             15.8   12.6    9.5    8.5
Current-account balance   12.0    7.9    5.0    4.0
Hong Kong
GDP                        4.2    5.0    5.5    6.0
Consumer prices           12.0    9.4    9.8   10.3
Trade balance             -2.1   -4.3   -4.5   -5.0
Current-account balance    2.5    1.7    2.0    2.5
Singapore
GDP                        6.7    5.8    6.8    7.0
Consumer prices            3.4    2.5    2.5    2.8
Trade balance             -4.1   -4.9   -5.0   -5.5
Current-account balance    3.3    2.9    3.5    3.0
a) The DAEs include Thailand and Malaysia in addition to the
four economies shown separately in the table. The figures given
for GNP/GDP and consumer prices are percentage changes from
previous period. Trade and current account balances are in $
billion. Current account estimates for Hong Kong correspond to
net exports of goods and services on a National Accounts basis
and therefore exclude investment income and transfers. The
trade balance corresponds to net exports of goods on a National
Accounts basis.
b) 1991 GDP/GNP weights.
Sources: IMF, International Financial Statistics; The Central
Bank of China (Taiwan), Financial Statistics: Taiwan District,
The Republic of China; Hong Kong Census and Statistics
Department, Monthly Digest of Statistics; OECD estimates and
projections.

The DAEs remain the OECD's most important trading partner in the non-OECD world, accounting for 8 per cent of total OECD trade. The United States, Japan and OECD Europe each account for about one-third of OECD trade with the DAEs. The OECD had a trade surplus of approximately $20 billion (cif-fob basis) with the DAEs in 1992, due in part to growing Japanese exports to the DAEs.

The deceleration of growth in the DAEs in 1992 was related more to domestic developments than to events in the OECD area. In particular, a sharper-than-expected slowdown in Korea in the second half of 1992 followed the adoption of an economic stabilisation package in late 1991. As a result, Korea's economy grew by only 4.7 per cent in 1992, the lowest growth rate in 12 years. It was accompanied, though, by a sharp deceleration of inflation and a reduction of the current-account deficit from a record $8.7 billion in 1991 to $4.6 billion last year.