IMF praises tiger economies after Thai baht crisis
IMF praises tiger economies after Thai baht crisis
WASHINGTON (Reuter): The tiger economies of southeast Asia won
high marks from the International Monetary Fund on Monday for
handling the fallout of Thailand's currency crisis, but a top IMF
official said Bangkok should act fast to keep its growth on
track.
IMF First Deputy Managing Director Stanley Fischer told a news
briefing that Thailand was likely to need a package of tax,
banking and currency measures to keep the economy on track. Some
elements of the plan had already been adopted.
"We do not see growth going to zero. We think with decisive
action soon, they can still grow this year," he said. But if the
authorities did not act promptly, Thailand could be heading for
"a long period of slow growth", he added.
Thailand was forced to devalue the baht currency this month
after strong speculative pressure, and the decision sent
shockwaves through currency markets across the region.
The Philippines devalued the peso and won US$1.1 billion in
emergency IMF funding to support future policies, Indonesia
widened the rupiah's trading band against the dollar and pressure
has risen on the free-floating Malaysian ringgit.
"The authorities have behaved rapidly and impressively,"
Fischer said.
He said the IMF was in contact with the authorities in
Indonesia, where the rupiah touched record lows against the
dollar on Monday before recovering slightly. "We are quite
confident that they know what they are doing and will deal with
market pressures in the right way," he said.
Fischer said there was no reason for the currencies of
regional economic powerhouses Hong Kong and Singapore to face
speculative pressure.
"These are immensely strong currencies and not vulnerable in
any way that we can see," he said. "They have very good monetary
authorities."
Thailand, unlike the Philippines, has not asked the IMF for
help to resolve its problems, but Fischer highlighted currency
flexibility, reforms in the financial sector and fiscal measures
as things that would probably be needed.
He said the enforced currency float meant that the first issue
was already being tackled and the authorities had made progress
in reforming the financial sphere.
A revised budget had been prepared before the currency crisis,
but more action might be needed.
Fischer said there were similarities between Thailand's
problems and Mexico's financial crisis of 1995 but the problems
were not on the same scale.
Growth had been strong longer in southeast Asian, which meant
efforts to adjust policies to rein in problematic current account
deficits were not likely to have the same recessionary effect.
Capital flows were more robust than during the Mexico crisis
and capital markets were not reacting in the same way.
"I think, as with everything, there are similarities -- a
country which was regarded as suspect by the markets -- but there
are critical differences," he said.
"We do not see the underlying adjustment in any of these
countries being anything like that which had to be done in
Mexico," Fischer said. "There is a problem, but it is not on the
same scale."