Soft landing seen for SE Asian economies<\/p>\n
By Anil Penna<\/p>\n
SINGAPORE (AFP): Southeast Asia's booming economies appear
\nready to cool as they enter 1996 after a year dominated by fears
\nof overheating.<\/p>\n
Economists tip a welcome soft landing with lower inflation for
\nIndonesia, Malaysia, the Philippines, Singapore and Thailand,
\nwith a correction of overheating symptoms that have clouded
\nregional stock markets.<\/p>\n
\"I would think the fear of overheating was the main theme in
\nthe region this year,\" said Eddie Lee, regional chief economist
\nof Vickers Ballas Investment Research in Singapore.<\/p>\n
\"Next year we will have increasing evidence that they have
\nstarted to cool, \" said Lee, who expects the Singapore bourse to
\nlead a regional charge in 1996 on strong economic fundamentals.<\/p>\n
His forecast is in line with a prediction by Merrill Lynch Far
\nEast, which sees key Southeast Asian economies headed for a
\nperiod of less rapid growth but no pronounced cyclical slowdown.<\/p>\n
Merrill Lynch sees 1996 gross domestic product (GDP) growth
\nmoderating to 6.5-7.0 percent for Indonesia, 8.0-8.5 percent for
\nMalaysia, 7.0-7.5 percent for Singapore and 7.5-8.0 percent for
\nThailand.<\/p>\n
The Philippines, which has grown relatively slowly, is tipped
\nto accelerate to 5.5-6.0 percent.<\/p>\n
Vickers Ballas tips inflation rates in the five economies to
\naverage 6.6 percent in the first half of 1995 and fall to 5.9
\npercent in the second.<\/p>\n
High current account deficits and inflation were the chief
\nworries for policymakers in the four developing Southeast Asian
\neconomies of Indonesia, Malaysia, the Philippines and Thailand
\nduring 1995.<\/p>\n
Their combined current account deficit is projected at US$29
\nbillion in 1995.<\/p>\n
The concerns became more pronounced in the wake of the Mexican
\npeso crisis which led foreign investors to focus on the
\nweaknesses of emerging markets.<\/p>\n
Bank Indonesia (BI) Governor Soedradjad Djiwandono repeatedly
\nwarned of overheating.<\/p>\n
In mid-December BI raised the reserve requirements of all
\nbanks from two percent to three percent, effective February,
\nafter expressing concern at the rate of credit expansion which
\nnow runs at 25 percent.<\/p>\n
Indonesia's current account deficit is forecast by some
\nanalysts to reach eight billion dollars, or six percent of GDP in
\n1995.<\/p>\n
Worries over Malaysia's economic health, including inflation
\nand a current account deficit projected at US$7.25 billion this
\nyear, also kept funds out of the Kuala Lumpur Stock Exchange.<\/p>\n
The government announced measures to cut consumer credit and
\nslow down consumption and put several giant infrastructure
\nprojects under review.<\/p>\n
In the Philippines, a rice shortage caused by a first-quarter
\ndry spell triggered a jump in inflation to its highest level for
\nthe year of 11.3 percent year-on-year in September.<\/p>\n
Fears of an imminent increase in domestic oil prices and an
\nexpanded value-added tax due to come into force next year cast a
\nshadow on the economy.<\/p>\n
Thailand suffered severe nationwide floods, causing food
\nprices to shoot up. Inflation stood at 5.7 percent year-on-year
\nin the first 11 months of 1995, up from 5.1 percent for all of
\n1994.<\/p>\n
Its current account deficit was expected to reach $12.4
\nbillion, or 7.5 percent of its GDP, in 1995.<\/p>\n
The Thai central bank has restricted commercial bank credit
\nextension, foreign currency loans and lending to non-productive
\nsectors by raising reserve requirements and setting growth
\nlimits.<\/p>\n
But according to Vickers Ballas, the concerns over current
\naccount deficits had been overblown.<\/p>\n
\"They are not caused by over consumption but imports of
\nintermediate and capital goods, productive imports which are part
\nand parcel of a fast-growing and industrializing economy,\" it
\nsaid in a report on Southeast Asian economies here.<\/p>\n
\"They are self-correcting within the framework of high
\ninvestment rate, export-led growth and high saving rate.\"<\/p>\n
Singapore has no deficit problems, battling instead high
\nbusiness costs and a strong local currency as its economy paused
\nfor a welcome breather after two years of double-digit growth.<\/p>\n
Abundant liquidity, low interest rates, a rise in domestic
\nconsumption, relatively slow increases in wages and overall
\nbusiness costs are foreseen for the city-state, which next year
\nassumes developed nation status.<\/p>\n
\"Investors will return their sights to the longer-term
\npositives of the region in 1996 after focussing on short-term
\noverheating fears this year,\" said Jim Walker, Singapore-based
\nchief economist of Credit Lyonnais Securities.<\/p>\n
Vietnam, which this year joined the Association of Southeast
\nAsian Nations (ASEAN), continued to grapple with problems of
\ntransiting to a market economy including corruption, bureaucracy,
\ndismal infrastructure and a skeletal legal system.<\/p>\n
But high growth, estimated at nine percent this year, and its
\nstatus as an untapped market among more mature ASEAN neighbors
\nkept the investors coming in.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/soft-landing-seen-for-se-asian-economies-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}