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.