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.