Asia financial sector bottoming out: ADB Institute

Asia financial sector bottoming out: ADB Institute

TOKYO (Reuters): Asia's financial sector appears to have hit bottom, but it will take time before the real economies in the region start to recover, Jesus Estanislao, Dean of the Asian Development Bank (ADB) Institute in Tokyo, said on Monday.

"The bottom has been reached and there might be a beginning of getting out of the crisis in the financial sector. I think the real sector is going to take some time before you get out of recession -- another three, four quarters down the road," Estanislao, a former Philippine finance minister, told Reuters.

"The key economies that people have been concerned about, which bore the brunt of the crisis -- Thailand, Korea, Indonesia -- seem to be presenting some glimmers of financial recovery. But I think the real sector is going to be very tough," he said.

Estanislao said that among the positive signs were increasing foreign direct investment flows to Thailand and to some extent, South Korea, and the strengthening of the Indonesian rupiah.

In terms of the real economy, "In the case of Thailand, I think the next quarter or so will be worse. Indonesia is still going to be in pretty bad shape. Thailand, in the next two quarters or so, the bottom will have been reached ...I'm not sure whether it will be positive for 1999, but it will be pretty close to zero, and that will be a big achievement," Estanislao said.

Question marks still hung over the prospects for regional recovery, he said, including the issue of how much the U.S. economy would slow down and how much Japanese bank lending would pick up after expected infusions of public funds.

Toru Kusukawa, chairman of the board of councilors at Fuji Research Institute, said separately that sentiment among businessmen toward Asia had improved, in part because of Japan's passage of legislation allowing the infusion of public money into the nation's undercapitalized but still viable banks.

"If Japanese financial institutions are supported by infusions of public money... it's a huge boost for the psychology of ASEAN (the Association of Southeast Asian Nations)," Kusukawa said.

"Finally, I think we have come to the bottom. Whether we have another break of the bottom is still a valid question, but as far as Thailand or (South) Korea, I see some indications they are coming to the bottom," he said. "There is a 10 percent possibility of a turnaround -- but until now it was zero percent."