In 2001, GDP growth is likely to fall back to just over 4 percent for the group. Slower export growth translates into a slowdown in domestic consumption and investment. The inventory cycle will also play a role in taking investment lower as firms work off excess inventories as external demand softens. Nevertheless, some additional investment in the high-technology sector is expected as the NIEs invest in new equipment and processes to enhance productivity and to take advantage of developments in the new economy. Furthermore, the strong performance of the People's Republic of China and its strong trade linkages with Hong Kong, China and with Taipei,China should provide a partial buffer for these two economies.
Governments are also likely to adopt appropriate macroeconomic policies to soften the downturn.
Across the NIEs, monetary policy is expected to ease more and interest rates may fall further. Fiscal stimulus is more likely in Korea and Singapore than in Hong Kong, China and Taipei,China. This will involve additional investment in new plant and equipment and in research and development. Sophisticated services-based activities and broadened diffusion of ICT pose challenges to those workers with fewer skills and lower education. Further upgrading of the workforce will be needed, particularly at the post-secondary level.