OECD sees Asian recovery, but RI remains a weak spot

OECD sees Asian recovery, but RI remains a weak spot

PARIS (Reuters): The OECD said on Tuesday that recovery in the "dynamic Asian economies" was proving stronger than expected after the crises of the past two years but Indonesia was still a weak spot.

The Organization for Economic Cooperation and Development said China's economy had stabilized after a decline in the first half of this year and forecast 7.1 percent growth there for 1999, 6.8 percent in 2000 and 6.5 percent in 2001.

In a twice-yearly report on the world economy, it said South Korea may grow by as much as 9.0 percent this year before easing to 6.5 percent in 2000 and 5.7 percent in 2001.

Malaysian growth was forecast at 4.5 percent this year, 5.5 next year and 6.5 the year after. Growth in the Philippines should reach 3.2 percent for 1999, 4.5 percent for 2000 and 4.3 percent in 2001, it said.

Thailand should see growth of 3.8 percent this year, 5.0 percent in 2000 and 7.0 percent in 2001, it said. Hong Kong's growth would be flat in 1999 but pick up to 4.0 percent and 6.0 percent in the next two years.

The OECD saw 0.5 percent shrinkage in Indonesia this year and 4.0 and 6.0 percent growth in 2000 and 2001 respectively, noting that one risk for the region was continued banking and corporate sector problems there and in Malaysia and Thailand.

"Growth in the dynamic Asian economies should pick up further and become more broadly based in the year 2000, although recovery in Indonesia is likely to be impeded for some time by the major financial problems of its banks and corporate sector," said the 29-country think-tank based in Paris.

"In China, policies to address the country's severe structural problems, together with some other adverse factors, have generated near-term deflationary pressures that authorities will need to continue to offset through expansionary macroeconomic policies," it said.

The report highlighted Jakarta's restructuring problems, saying: "The especially severe financial problems in Indonesia are likely to significantly restrain recovery there for at least the next year".

A strong rebound in activity in Malaysia and Thailand should help the restructuring process in those two countries, it said.

"However, the possibility of a more serious credit crunch, particularly in Thailand, cannot be ruled out," it said.