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."