IMF measures blamed for deflationary push
IMF measures blamed for deflationary push
NEW YORK (AP): IMF-prescribed austerity measures in Thailand,
Indonesia and South Korea have caused deflationary conditions and
Asia must rely on exports to overcome its financial problems,
Thailand's deputy prime minister said Friday.
"The IMF measures have not always shown the right result,"
Supachai Panitchpakdi told a conference on challenges and
opportunities of the Southeast Asia crisis hosted by Columbia
University Business School.
Referring to countries that have received assistance from the
International Monetary Fund, he said, "Fluctuations in currencies
are determined excessively by moods and financial markets."
Supachai, who also is minister of commerce, said the currency
fluctuations that have taken place in Asia seem to be
"exaggerated" by the excessive role of international fund flows
over trade considerations.
He said Thailand's growing current account surplus reflects a
decline in imports rather than an increase in exports. He noted
that Thailand's imports in general have been declining by an
annualized rate of 13 percent to 14 percent for the last several
months.
"For exports, it's a difficult time for Asia," because
competing economies of the region have devalued their currencies
at the same rate, he said.
Supachai called this "alarming," and said it was caused in a
large part by the deflationary burdens of the Asian crisis.
To overcome the current problem, Supachai said Thailand needs
to overhaul its financial systems, continue trade and investment
liberalization, maintain fiscal discipline and reduce state
ownership.
The Thai commerce minister said that the austerity steps must
be supplemented with restructuring efforts, including increasing
agricultural productivity.
He said interest rates are likely to remain at their current
high levels through the end of 1998.
However, he would not rule out easing interest rates.
Among other points at the one-day conference:
* The East Asian currency crisis is expected to reduce the role
of the U.S. dollar in the region's exchange rate regime. This is
because the economies in the area have diverse linkages with the
rest of the world in trade and foreign direct investment, said
Masahiro Kawai, professor of economics at Tokyo University.
"It is more appropriate for the East Asian economies to
stabilize their exchange rates with respect to a basket of
currencies consisting of not only the U.S. dollar but also the
Japanese yen, the euro (after Jan. 1, 1999), and some other
currencies," he said.
* Large swings in exchange rates among the ASEAN countries
would be counterproductive because they would "alter
international price competitiveness suddenly" and make the
prospective ASEAN Free Trade Agreement -- expected to be completed
by 2003 -- unsustainable, Kawai said in his speech.