Asian Development Bank sees early signs of a pickup in output in HK and the mainland as Sars fallout recedes The fading effects of the Sars outbreak and improved economic prospects have prompted the Asian Development Bank to raise its growth forecasts for Hong Kong and the mainland. The Manila-based bank yesterday said it expected Hong Kong's gross domestic product to expand 2.1 per cent this year, compared with 2 per cent forecast in April. It is more bullish for next year's prospects, forecasting that GDP will grow by 4.8 per cent compared with the 4 per cent forecast. The ADB's outlook for the mainland, the world's fastest growing major economy, is even better. The bank said its economy would grow 7.8 per cent this year, compared with 7.3 per cent last year. The mainland economy is expected to expand 7.9 per cent next year. The revised figures were contained in an update to the ADB's annual Asian outlook. The bank kept its 5.6 per cent forecast for this year's East Asian growth unchanged because Taiwan and South Korea are expected to perform worse than expected. But for 2004, it raised its forecast to 6.5 per cent from 6.2 per cent. GDP is the value of all goods and services produced in an economy. While noting that Sars seriously disrupted economic growth in the second quarter, especially in the mainland, Hong Kong and Taiwan, the ADB said 'some nascent signs of a rebound ... have emerged'. 'East Asian economies are recovering from the economic disruption caused by Sars,' the report said. 'Consumer and business confidence are improving. Globally there are signs of a firmer recovery in the United States and some improvements in Europe and Japan. These developments will benefit the economies of East Asia and lift their growth rates in the second half of 2003 and in 2004.' The report adds to mounting evidence supporting the view that while the viral outbreak hurt consumption spending in the second quarter, its impact on other areas of the economy was overestimated. The ADB said strong exports and investment had helped drive growth in the region. Although Sars stopped the movement of people, it did not stop the movement of goods. Other data also pointed to a sustained recovery. The unemployment rate in Hong Kong is edging down from a record high and the government said there were 24,600 job vacancies in August, 13.3 per cent more than the month before. The bank said China was becoming a bigger driver of regional trade and economic growth, mainly through its voracious appetite for imports from other Asian countries. Economists have noted that China is demanding both raw materials for factory production and consumer goods. The mainland's 'trading activities have provided considerable momentum for export expansion in other East Asian economies', the report said. It added that the mainland had become one of the largest export markets for all other East Asian economies, and that had helped Hong Kong's exports to boom as well. Other factors had helped to raise growth prospects, including continuing strong growth in investment in fixed assets such as roads, bridges and factories. In Hong Kong, a recovery in consumer demand and a pickup in investment would help the economy rebound next year. The Closer Economic Partnership Arrangement, which offers zero tariffs on certain Hong Kong exports to the mainland, would probably result in modest benefits because of the low level of manufacturing in the city, the ADB said.