We must caution that these forecasts are made in an environment of great uncertainty

Myoung-Ho Shin ADB vice president

Along with South Korea - which is expected to grow 2% rather than the 4% predicted before - these "newly industrialised economies" represented the great success stories of the 1980s and early 90s.

Japan's economy, to no-one's surprise, is set to shrink by about 0.5%, according to the ADB.

Slowdown

For Asia's developing nations in general, the ADB says growth will be about 3.4% on average, less than half the 7% recorded in 2000 and down from its previous expectation of 5.3%, voiced in April. "The global slowdown in economic activity is turning out to be deeper, more synchronised across major economies and more persistent than expected in April," the bank's report said.

ADB's GDP growth predictions: 2001 (actual 2000 growth)

Bangladesh: 6.0% (5.9%) Central Asia: 7.7% (7.8%) China: 7.3% (8.0%) Hong Kong: -0.4% (10.5%) India: 5.6% (5.2%) Indonesia: 3.2% (4.8%) Malaysia: 0.8% (8.3%) Pacific Island members: 1.2% (-1.4%) Pakistan: 2.6% (3.9%) Papua New Guinea: -2.0% (-1.8%) Philippines: 2.7% (4.0%) Singapore: -3.0% (9.9%) South Korea: 2.0% (8.8%) Taiwan: -2.0% (5.9%) Thailand: 1.5% (4.4%) Vietnam: 6.0% (6.1%)

"In addition... the 11 September terrorist attacks and subsequent military actions have disrupted economic activity... and increased risk aversion."

That makes getting inward investment a much trickier prospect for many countries, it warned.

The expansionary policies now under way across Asia, should start to make a dent in the slowdown next year, the bank said.

But even these figures assume, for example, that the campaign of bombing in Afghanistan will not last more than a few months.

If the war on terror goes on much longer than that, the ADB said it would have to revise the figures downwards again.

"We must caution that these forecasts are made in an environment of great uncertainty," said ADB vice president Myoung-Ho Shin.

South Asia diverges

And Pakistan is even worse off than the so-called Tiger economies, and is likely to suffer the most from the conflict in the region.

The disruption in trade could cost as much as $1bn if the fighting continues, the ADB said, with GDP growth dropping to 2.6% this year and 3.9% in 2002.

A drought expected this winter will hit wheat stocks, further hurting Pakistanis, the bank warned, and the internal disturbances triggered by the assault on Afghanistan by US-led forces meant tax revenues are threatened.

But in India, on the other hand, a more protected domestic economy means that 5.6% growth should be possible.

And China - now fulfilling long-held expectations that it is to become the regional economic powerhouse - could grow by 7.1%, the ADB said.

Plans for a China-Asean free trade area within 10 years reflected this importance, the bank said, giving its backing to the idea.