OECD sees bleak year for crisis-hit Asia

OECD sees bleak year for crisis-hit Asia

SINGAPORE (Agencies): The OECD said on Wednesday it saw a bleak year for crisis-hit Asia with recessions in Indonesia and Thailand, and other roaring Tiger economies of the recent past reduced to a crawl.

But it said prospects for the region could improve in 1999 as long as governments saw through tough reforms.

The economy of Indonesia, savaged by a maelstrom of crisis which threatens to explode into social unrest, will contract by a huge 8.5 percent this year, the Organization for Economic Co- operation and Development (OECD) said in its latest twice-yearly outlook.

Thailand, the first domino to topple in Southeast Asia last year, was likely to see its economy shrink by 1.5 percent this year after a 0.4 percent contraction in 1997, said the OECD, which groups 29 of the world's most advanced economies.

Malaysia, which grew by a typical 7.8 percent last year, was looking at expansion of a mere 1.4 percent this year, while the Philippines would inch along at only 1.8 percent growth against 5.1 percent last year, the report said.

Hong Kong, the epitome of the open economy favored by modern markets, is expected to grow by a marginal 0.9 percent compared to 5.2 percent in 1997, the year Britain handed its former colony back to China.

Singapore, widely praised for its efficient economic management, is seen growing by 3.2 percent compared to 7.5 percent last year, the kind of expansion the city state has been used to for much of the last two decades.

Only Taiwan, with forecast growth of 5.9 percent, and China, at 7.2 percent, will maintain anything like consistent expansion, the report said.

The OECD saw prospects for the region in 1999 as considerably healthier, with Indonesia turning the corner into growth of two percent and Thailand's economy growing by 4.5 percent.

The report said Malaysia would start clawing its way back with 3.5 percent growth, while the Philippines should accelerate its expansion to four percent, Singapore to 5.2 percent and Hong Kong to 3.8 percent.

China would grow by 7.5 percent and Taiwan by 6.2 percent next year, it said.

"The repercussions of the financial turmoil on the economies of the region will continue for some time further," it said.

Most countries were doing that, the OECD said, offering particular praise for Thailand, where "prompt and vigorous policy actions" had contained the crisis.

But the report sounded a more skeptical note over commitment to reform in Indonesia, which is nearing completion of its third agreement with the International Monetary Fund on conditions for a $43 billion rescue package.

"Rigorous implementation of the financial and structural reforms is essential, both to prevent the crisis from re-emerging and to allow an eventual return to sustainable growth," it said.

The report blamed structural weaknesses for the crisis, which has obliged the IMF to put together rescue packages worth more than $100 billion for Indonesia, Thailand and South Korea.

But it said regional governments were not entirely to blame. So were Western banks, which some critics in Asia allege are being baled out from IMF packages.

"Legitimate questions exist as to whether the Asia crisis could have become so severe if lenders had been behaving with a prudent respect," it said.