Economic activity in the non-member Asian economies has been rebounding rapidly, following the containment of the outbreak of severe acute respiratory syndrome in June. Growth in the Dynamic Asian Economies is expected to gain momentum during 2004 on the back of strong exports, particularly to China, and a recovery in domestic demand. In China, a surge in capital spending accompanied by a marked acceleration in bank lending is pushing real GDP growth to its fastest pace in several years. The monetary authorities now face the challenge of ensuring that lending growth does not become excessive, a task complicated by the large balance of payments surplus and substantial excess reserves in the banking system. In South America, the economic recovery initiated in the second half of 2002 is gaining momentum, based on favourable export demand, improved terms of trade for commodities, and sizeable fiscal and current account adjustments in many countries in the region. After a recession in the first half of 2003, growth in Brazil is finally picking up. Argentina’s economy is also rebounding, while GDP growth in Chile is accelerating. In contrast, Venezuela remains a dark spot in the region. While growth in South-east Europe slowed somewhat in 2003, it accelerated in the Newly Independent States, led largely by a strong growth pick-up in Russia. Economic activity in Russia was mainly driven by oil and related sectors, as well as sectors oriented to domestic consumption. Growth is set to moderate in 2004, not least as a result of slower investment growth following on from the so-called “Yukos affair”...