ANZIP recognizes RI economic reforms

ANZIP recognizes RI economic reforms

SYDNEY (Reuters): ANZ Investment Bank (ANZIB) said yesterday it believes only Indonesia has produced a credible response to the Southeast Asian economic crisis, and argued that banking reform is the key to sorting out the region's problems.

Jerome Booth, Global Head of Market Research at ANZIB, the funds management arm of Australia and New Zealand Bank Group Ltd, also said he expects property markets in many Asian countries to fall by 50 to 60 percent rather the 20 to 30 percent seen so far.

However, U.K.-based Booth, told an emerging markets seminar in Sydney that there is certainly no sense of panic about the region by those who have been in emerging markets for some time.

"Thailand was warned over 18 months ago by the IMF that it had a problem and it needed to sort it out and we are still waiting for credible policy responses," Booth said.

"On the other hand Brazil had less than two weeks to come up with some sort of response to an attack on the currency and it came up with a record US$18 billion rescue package, which is going to halve the fiscal deficit of the country, he said."

He said this "dynamic" policy response, and a similar reaction by Russia, is why people now accept the new environment in Latin America and Eastern Europe.

"We expect nothing less. It is somewhat sobering that there is some way to go in some of the Southeast Asian countries," Booth said.

He also believes that it is correct for the IMF to talk a lot about transparency, because the underlying problem for Asia in the longer term is about how the market works in the tradable sector.

Booth said fears over Japan have been overdone and expects a positive impact if some appropriate policy reaction is taken and saw a bright economic outlook for the country.

He also felt that the U.S. response to the Asian crisis is very important, although he does not expect a major policy to be forthcoming from its government.

"One can't be too certain about Mr Greenspan, but I certainly think that the next move in interest rates is down," Booth said of the Fed Governor's thinking.

"You do have a big impact in terms of deflation being imported into the United States which will have a very positive impact on inflation and really enables Greenspan to avoid any rate rise," he added.