Asian recovery likely to take time, study says
Asian recovery likely to take time, study says
DAVOS, Switzerland (Reuters): Recovery in hard-hit Asia will
likely be slow, said economists and officials at the World
Economic Forum's annual meeting.
The Asia Competitiveness Report, an annual study published by
top economists including Harvard's Jeffrey Sachs, saw chances for
an upswing this year after profound problems, following currency
devaluations and investment outflows.
"But while the region is moving beyond the panic stage, and
thereby poised for the start of economic recovery, the pace of
recovery is still open to question, because of the remaining
uncertainties about the clean up of debt and of long-term
institutional reforms," the study said.
One Chinese economist in Davos said "some people need some
dramatic changes, they need some good news" right away. But he
said, changes will take time.
Necessary reforms, such as revamping the banking systems of
such countries, also are costly.
Indonesia's coordinating minister of economics, finance and
industry, Ginandjar Kartasasmita, said here the cost for his
country's bank restructuring was about 29 percent of its gross
domestic product (GDP), or US$40 billion.
In GDP terms, this was about in line with the costs of similar
restructurings in Thailand and South Korea.
Baht
The problems which surfaced after the devaluation of
Thailand's baht in July 1997 have left devastation in the region,
with economies depending on trade for capital inflow, but hurting
from the lack of trade financing due to the banking
restructuring.
Even China, where growth is positive, faces a slowdown.
Official forecasts call for China's GDP growth to slow to
about 7.0 percent this year from 7.8 percent in 1998.
Some non-Chinese economists predict China will have to devalue
its yuan currency to stave off a strong drop in growth.
But Chinese economists here noted much of China's exports
depend on the import of semi-manufactured goods, so a devaluation
may do little good. Such a move could also have a destabilizing
impact on the rest of Asia.
Lu Mai, executive vice secretary general and chief executive
of the China Development Research Foundation, specifically ruled
out any devaluation now.
But he said China could eventually move to allowing the yuan
to fluctuate more freely, once the situation in Asia calms down.
Social unrest has also increased in many countries, raising
fears about social unrest.
Asked what kept him awake at night, one Chinese economist here
told Reuters: "Employment this year is number one".
"About 13 million people need jobs," he said.
Other estimates put the figure as high as 15 million.
Economists believe China's moves to strengthen its social welfare
net could soften the impact somewhat, however.
On the bright side, problems in some places have paved the way
to reforms. Indonesia, where growth plummeted over 13 percent in
1998, has suddenly seen its government opt for elections in June,
and consider independence for East Timor.
With respect to growth, Indonesia's Ginandjar expected
momentum to pick up by mid-1999 and to continue in 2000, saying
elections would help to stabilize the country and the economy.
"Once we have these elections -- and if the elections
are...clean, free, just, transparent -- then whatever the result
of the elections (this) is the expression of the will of the
people. Then the government will begin (to gain) credibility,
certainty will return," he said.