IMF sees worst over for Thailand and South Korea

IMF sees worst over for Thailand and South Korea

WASHINGTON (Reuters): The worst is over for Thailand and South
Korea after last year's economic crises and Indonesia should soon
follow them on the path back toward growth, a senior IMF official
said on Wednesday.

"I think all of Asia is benefiting from improved market
sentiment, and this you see strongly in countries like Thailand
and Korea," Anoop Singh, deputy director of the IMF's Asia and
Pacific region told Reuters.

"A general emerging market view, which we share, is that the
worst should be behind us and that these countries are now
bottoming out. Whether this means a bottoming out precisely in
the next quarter or two is more difficult to pinpoint."

Singh was speaking days after the IMF executive board approved
payments totaling more than $2 billion for the three Asian
countries, once hailed as fast-growing tiger economies, but now
plagued by recession and looking for outside help.

He said Indonesia was also entering "the same virtuous cycle"
of rising reserves, falling interest rates, a current account
surplus and low inflation.

But he added a note of caution on Indonesia, which has
received $9 billion of a $11 billion IMF loan approved last year
despite delays earlier this year due to political and economic
problems.

Western officials say former President Soeharto did not fully
back a reform program agreed with the IMF and fund disbursements
were postponed during the bloody rioting which ultimately drove
Soeharto from power.

"Indonesia does start out from a more complicated, difficult
recent history," Singh said. "The drop in the exchange rate was
much sharper and the rise in inflation as a consequence was much
higher, so one has to be more cautious."

"If they can keep to the program, which we have no doubt they
will, they can expect to see the same development in Indonesia as
we have seen in Korea and Thailand. We have a kind of case
history behind us...of declining interest rates, rising reserves,
strong current account surplus and low inflation."

The fund put together international rescue deals worth a total
of some $120 billion for the three countries last year and most
of the IMF share of the cash has been disbursed.

South Korea, whose $58 billion rescue package was the biggest
the international community has ever offered, has already started
paying back the high-interest portion of the IMF share of the
loans, but Singh made clear that the other countries might still
need extra cash.

"In order to maintain a strong safety net and in order to
maintain a strong fiscal stimulus, which is appropriate in the
circumstances, there can be no doubt that Indonesia needs
external financing to maintain these expenditures," he said.

Help in balancing the budget -- Indonesia does not plan
domestic financing for any budget gap -- would traditionally come
from bilateral sources or from other international financial
institutions rather than from the IMF, he added.

Singh said Thai reserves had recovered substantially, but he
noted that they remained below the level before the crisis
unfolded in July last year.