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.