Analyst sees shadow over Asian economies
Analyst sees shadow over Asian economies
BANDAR SERI BEGAWAN (Reuters): High oil prices, political upheaval and sliding global electronics prices will drag down Asian economic growth next year, a senior Goldman Sachs official said on Tuesday.
Kenneth Courtis, vice-chairman Asia for the U.S. investment bank, said some Asian nations might have to pay a high cost for not undertaking bold economic reforms as their economies slowed down in the months ahead.
"The problem is after the first quarter, things will slow down very quickly. The first reason is that energy prices have gone up and that is already starting to have a knock-down effect," said Courtis, who was speaking on the sidelines of a meeting of chief executives from the Asia-Pacific region.
"Oil is a huge factor as terms of trade have dramatically turned against Asia," he said, adding that the Philippines, South Korea and Taiwan would be hit the hardest.
An imminent slowdown in the U.S. economy and declining global prices of computer chips would also cast a shadow over Asian economies next year, he said.
"All of that is coming to hit Asia. So we are going to see growth come down pretty substantially in the next quarters."
Goldman Sachs forecasts growth in the Asia's newly industrialized economies (NIEs) will slowdown to 5.4 percent in 2000 from 7.4 this year.
Southeast Asian economies are expected to grow 4.0 percent next year against 4.8 percent in 2000, it said.
The Asia-Pacific Economic Cooperation forum forecast this weekend that regional gross domestic product would grow 3.5 percent in 2001, against 4.3 percent in the current year.
Courtis said many Asian economies had squandered the benefits of strong growth by not undertaking bold financial reforms.
"I have been saying all along that we should be using this window of growth which was driven by the huge rebound by growth in the global economy," he said.
"As the economies slowdown in the next few months, we will see many of the unaddressed problems coming right back to the surface," he added.
Investors say high banking debts in Thailand, a maze of cross- corporate governance in Korea, stalled privatization in the Philippines are examples of a lack of reform efforts in Asia.
Courtis said weak borrowers in the region would find themselves in trouble as interest rate spreads widened.
"We already see that happening in Korea. You see problems in the banking system coming to the surface in Taiwan, Thailand and elsewhere," he said.
Meanwhile, central bankers from the world's major economies said late on Monday the impact of lofty oil prices has so far been modest, and that they expect prices to abate in early 2001 after the northern hemisphere winter.
Bank of England Governor Eddie George, summing up a meeting of central bankers from the Group of 10, said the group expected an oil price drop once winter fuel demand wanes.
The bankers gathered in the Mexican capital for a regular meeting of the Bank of International Settlements (BIS).
"The conclusion we reached today ... was that at the current level of oil prices, the impact on the world economy as a whole was more likely to be "fairly modest," George told reporters.
He added that this impact would likely be modest both on inflation and economic activity in the world's major economies.