IMF's Neiss sees Asian recovery by late next year

Wed, 14 Oct 1998, 00:00 WIB | Source: REUTERS

SINGAPORE (Agencies): The International Monetary Fund (IMF)
expects crisis-hit Asian economies to start growing again in the
second half of next year, Hubert Neiss, director of the Fund's
Asia-Pacific department, said on Tuesday.

"Presently, we expect it in the second half of next year," he
told reporters on the fringes of the annual East Asian Economic
Summit.

"The turnaround will come earlier. That means negative growth
rates will get smaller and smaller, finally we will get positive
growth in the second half of next year, but this is not very
precise timing," he said.

Neiss said a lot would depend on how global markets stabilized
and how countries pursued their programs of reform.

"The implementation of strategy for recovery, microeconomic
policy and structural policies," were crucial, he said.

"And very important for the region is an early recovery in
Japan and a calming of the current turbulence in financial
markets," he added.

But he ruled out an "external stimulus" from Japan in the
"immediate future" that could aid the recovery of other battered
economies in the region despite Tokyo's feverish pace in recent
days in tackling its banking crisis.

Neiss said he expected the timing of recovery to apply to all
the crisis-hit Asian economies, including Indonesia, which has
been the most savagely mauled.

The Indonesian rupiah has lost more than 70 percent of its
value against the U.S. dollar since Asia's crisis began in July
last year. Millions of its people are sliding below the poverty
line.

Other currencies in the region have also fallen heavily, but
Neiss would not be drawn into predicting where they would go
next.

While "extreme (currency) volatility has always been a
disturbing factor", he said, "I cannot make predictions on the
basis of the day to day movement of the currency."

Neiss said Thailand's recovery was important to the IMF as
Bangkok had "by and large implemented the strategy of the IMF
program in Asia".

Neiss said Indonesia needed an orderly political succession
following the traumatic events of May, when President Soeharto
quit in the face of riots in which hundreds of people were
killed.

Soeharto's successor, B.J. Habibie, has promised elections in
the middle of next year.

"What is important for the economic program is that the
political transition is as smooth and orderly as possible," Neiss
said.

"If it is not, you will have again speculation, undesirable
fluctuations in the exchange market and so on. Political
stability is essential for economic success," he said.

Neiss said he is also satisfied with the new bankruptcy laws
that Indonesian passed in August.

"So far, we are satisfied with the new law," IMF director for
Asia-Pacific Hubert Neiss told journalists.

Neiss is scheduled to visit Indonesia later this week as part
of a regular monthly IMF review of the country's progress, which
is expected to lead to the disbursement of a further $1 billion
in IMF assistance.

Indonesia implemented ambitious new bankruptcy legislation in
August, which replaced an antiquated Dutch law dating back to the
turn of the century.

Bankers and lawyers say it's too soon to judge the
effectiveness of the law however, although it did succeed in
having a real estate company - PT Modern Realty - declared
bankrupt on Monday, the first company in years to find itself
declared bankrupt in Indonesia.

Indonesian companies are saddled with billions of dollars in
debt, which makes a working bankruptcy law vital, creditors say.

For the whole of 1999, Neiss expects a flat performance from
the Indonesian economy, with the gross domestic product only
expanding in the following year.