Global impact of Asia crisis 'to be worse than expected'

Global impact of Asia crisis 'to be worse than expected'

GENEVA, Switzerland (Reuters): Bankers and economists at a business symposium on Wednesday held out little hope for any rapid recovery for troubled Asian economies and said the impact on other countries may be worst than expected.

"I think we're going to see a deep recession in Asia for five years or so. We're going from bad to worse," said Steve Hanke, professor of applied economics at Johns Hopkins University in the United States.

Hanke, a former economic advisor to Indonesia's ex- president Soeharto, also said that in his view the duration of the slump in Asia was dependent on the length of the economic depression in Japan.

But he suggested there was little hope that Japan would come up with any rapid solutions to its economic problems.

"The whole reason I'm so pessimistic is because I know that Japan isn't going anyplace," Hanke said during a panel discussion at the gathering, organized by the Paris-based International Chamber of Commerce.

Bankers, business leaders speaking on panels during the day agreed that more transparency and regulatory cooperation was needed on a worldwide basis to keep pace with what is rapidly becoming a borderless economy.

"What is lacking is the appropriate international architecture to manage this complex reality," World Trade Organization Director General Renato Ruggiero said in a speech.

Several speakers also predicted that the impact of Asia's financial troubles on majors economies such as the United States and the European Union would be more severe than many now believed.

Jacob Wallenberg, chairman of Sweden's Skandinaviska Enskilda Banken, said the U.S. and Europe were still likely to experience what he called reasonable growth rates.

But he also believed that economic downturn in these countries would be worse than currently expected.

"I am quite convinced that we will see a significant number of profit warnings on companies working in the Far East," Wallenberg said.

"My bet is that we're going to see an economic downturn that is stronger than what is anticipated," he said when asked for his views about Asia's impact on the U.S. and European economies.

Hanke predicted that the repricing of risk in emerging markets, persistent commodity price weakness, a growing current account deficit and a a bear market in equities would all contribute to slower growth in the U.S.

"We will go into a bear market in the United States because analysts are forecasting 14 percent year-on-year growth in earnings. We'll be lucky if there will be five percent," Hanke said.