Roaring Out of the Doldrums

• Share

TIME's Pacific Board of Economists sees a growth surge for the region

After spending 1982 in the doldrums, the economies of the nations bordering the Pacific are again becoming dynamos. In South Korea, Taiwan and Singapore, where factories are churning out exports at a pell-mell pace, economic growth has reached annual rates in the 6% to 9% range, up from 4% to 7% a year ago. Japan is gliding along at a more modest 3.4% rate, but its government has a plan to spur domestic demand. Australia is bouncing back from its worst recession in three decades.

That was the rosy report from the members of TIME'S Pacific Board of Economists during a meeting in Singapore. The economists predicted that virtually all the major Pacific countries will enjoy 1984 growth rates in the 4% to 8% range. Unemployment should edge downward in many nations, and no new outbreak of inflation is in sight.

Yet TIME's economists remain cautious about their countries' long-term outlook. The Pacific region has been plagued by political instability: social unrest in the Philippines, uncertainty about the post-colonial status of Hong Kong and the assassination of key members of the South Korean government. "I am sure that none of the Asian economies will collapse because of political factors," said Edward Chen, of the University of Hong Kong, "but it may be difficult to keep up with past growth. It's never too early to worry."

The mam spark for the Pacific surge is the strong recovery of the U.S. economy, which has been expanding at an 8.8% rate over the past six months and generating many new jobs. The Government announced last week that U.S. unemployment dropped from 9.3% to 8.8% in October. With Americans spending freely again, South Korea's exports to the U.S. are up 34% this year, while Taiwan's have increased 20%. But demand in Western Europe and Japan remains weak. Warned Lawrence Krause, a senior fellow at the Brookings Institution in Washington, D.C.: "The world needs growth in Europe and Japan. The U.S. can begin a recovery, but it cannot pull everybody along to prosperity."

The outlook for key Pacific nations:

Japan. Unlike its Asian neighbors, which are still in the launch phase of industrial development, Japan has already reached cruising altitude. Said Bunroku Yoshino, director of the Institute for International Economic Studies in Tokyo: "Japan is very comfortable, like the U.S. was in the 1950s under President Eisenhower." He predicted that unemployment, now only about 2.5%, may go to 2% in 1984. Exports were up about 10% in the third quarter of the year and will stay strong. Japan's car manufacturers have unveiled new models that will undoubtedly dazzle foreign customers (see box).

Despite the export surge, Japan's overall growth rate of 3.4% is sluggish by Asian standards. Reason: consumer demand inside Japan is lagging. Cameras, cars, television sets and other appliances have become so ubiquitous in Japan, said

Yoshino, that many families have "no more big items to buy for the moment." The government announced a proposal last month to spur the economy with a $5 billion tax cut and $8.1 billion in new public works spending. Yoshino forecast that these measures might help lift Japan's growth rate to 5% by the end of 1984.