E. Asian recovery 'encouraging' but concerns remain
E. Asian recovery 'encouraging' but concerns remain
GENEVA (AFP): The pace of East Asian economic recovery following the 1997 financial crisis has been "encouraging" but reasons for concern remain, a new United Nations report said.
Malaysia's positive influence on the region in pursuing policies to overcome the crisis played a particularly important role, the report by the UN Conference on Trade and Development (UNCTAD) said.
Apart from Indonesia, East Asia has seen per capita incomes return or go above levels seen before the 1997 crisis, exchange rates strengthen and foreign capital begin to return, the 2000 Trade and Development Report said.
Secretary-General of UNCTAD Rubens Ricupero said the initial policy response to the crisis was "unnecessarily severe" and economies only bounced back when austerity policies were reversed.
"The positive influence on the entire region of the example of Malaysia in pursuing policies based on autonomously set objectives and priorities cannot be emphasized strongly enough," he said in the report.
But, warns the report, the recovery has been accompanied by limited corporate restructuring and supported by highly favorable world economic conditions which are susceptible to change.
Exports are unlikely to continue at their recent pace while public deficits and debt have been on the rise in most countries seriously hit by the crisis.
"Fiscal consolidation needs to wait until private demand takes the lead in growth," the report noted, adding this could be delayed by persistent unemployment.
Ricupero also warned against allowing global market forces to dictate future growth and development.
"There is a major role for public investment and the involvement of a developmental state with new policy agendas," he added.
The US economy grew by more than four percent last year and continued its role as "white knight" to the global economy, while the European Union (EU) failed to match its 1998 growth rate, the report noted.
But growth in the EU is generally expected to reach or exceed three percent this year, "harboring hopes that EU will soon replace the United States as the global growth engine", the report said.
The Japanese economy, which picked up last year after a two- percent decrease in 1998, saw an annual growth rate of 0.3 percent for 1999, while developing Asian economies grew on average by more than five percent last year.
China also benefited from the regional recovery but its seven- percent growth was the slowest in a decade, after the short-term easing of monetary and fiscal policies failed to stimulate private consumption.
Meanwhile, in Africa per capita income stagnated last year after growth failed to reach the three percent achieved in the previous two years.
However, countries with a currency linked to the French franc benefited from the depreciation of the euro.
"After a number of lean years, the economies of Nigeria and South Africa appear to have bottomed out. But on the whole, neither the domestic nor the external conditions are yet right for an African growth revival," the report warned.
Gross Domestic Product (GDP) per capita decreased in Latin America for the first time last year since 1990, but Mexico showed a "relatively strong performance" because of its close ties to the US.
"Things could have been much worse for the region if Brazil had not weathered its financial storm surprisingly well," it said.