Asia's Economic Growth Tops Rest of World : Pacific Rim: Although the pace slowed in 1989 because of poor performances by China and India, the area still had a 5.4% expansion.

Asia’s Economic Growth Tops Rest of World : Pacific Rim: Although the pace slowed in 1989 because of poor performances by China and India, the area still had a 5.4% expansion.

By MARIA L. La GANGA

April 30, 1990 12 AM PT

TIMES STAFF WRITER

Although economic growth in Asia’s developing nations slowed in 1989, the area “continued to outperform other regions of the world by a healthy margin, growing at considerably higher rates than the world economy,” according to a study that will be released today.

The area’s growth rated declined to 5.4% in 1989, down from a skyrocketing 9.3% recorded in 1988, but it still outpaced the rest of the world, said the Asian Development Bank in a report called “Asian Development Outlook 1990.” In comparison, the world economy grew at a sluggish 3.2%.

The slowdown was caused in part by poor performances in the People’s Republic of China and India. The Chinese economy had sustained double-digit growth in 1987 and 1988, but austerity measures instituted in 1989 had dramatic effects. India was hampered by slow expansion in agricultural production.

The star performer was Southeast Asia, where policy reforms improved efficiency and strong export growth fed economic growth. Southeast Asia recorded a “vigorous expansion” of 7.8%, the report said.

And the outlook for Southeast Asia should continue to be good, with the major countries in the region able to sustain the pace of economic activity seen in 1989. According to the report, Southeast Asian nations should perform as follows:

* Thailand: The gross domestic product--the value of goods and services produced in a given country--skyrocketed in Thailand in the late 1980s, reaching double digits in 1988 and 1989. According to the report, exports have been a major stimulus to growth. Growth is expected to hover just below 10% in 1990. But there are caveats.

“Rapid growth in industry and services has created many new jobs, thus reducing the unemployment rate,” the report said. “In fact, the demand for labor has outstripped supply in some cases, creating a shortage of skilled manpower. . . . If such shortages continue, they could impede industrial growth.”

* Vietnam: After strong growth in the early 1980s, Vietnam’s economy stagnated between 1985 and 1988. One reason was extreme inflation caused by shortages of rice, the nation’s major food crop.

But economic reforms caused growth in 1989 to reach 8.2%, a substantial improvement over 1988’s level of 5.9%. Strong growth in the agricultural sector is a principal reason. Vietnam’s economy should continue to improve over the next two years, the report said, with an 8% growth rate feasible.

* Philippines: Political unrest, in particular failed coup attempts against President Corazon Aquino and continued pressures on her government, will slow growth in the Philippines in 1990, the report said. The Asian Development Bank had earlier estimated a growth rate of 6% to 6.5% in the country but has lowered that estimate to 5%.

“Beyond 1990, the outlook hinges on the speed with which political uncertainty is removed and investor confidence renewed during 1990,” the report said.

* Indonesia: Indonesia’s economy has long been heavily dependent on earnings from petroleum exports. Despite the vagaries in the oil market, the country has managed to maintain a steady growth rate of about 5% in recent years, mostly because of tight economic reforms.

“The prognosis for growth over the next two years is bright,” the report says.

* Malaysia: Although the Malaysian economy plunged into deep recession in 1985 and 1986, its recovery in the past several years has been stronger than expected. That’s good--and bad. The nation’s economy, the report said, now shows signs of overheating, such as higher inflation rates and tight labor markets for skilled and unskilled workers.

Still, “as Malaysia’s economic growth in 1990 and 1991 is expected to be slightly lower than in 1989,” the report said, “some of the problems of an overheating economy will be alleviated.”

* Laos: Severe climatic conditions make Laos agriculture-based economy especially vulnerable and cause its growth to fluctuate greatly from year to year. But the nation was able to sustain a 4% growth rate in 1989, up from 2.1% in 1988, and the growth rate is expected to fluctuate above 5% in 1990 and 1991.