SE Asia to grow 4.5% this year, IMF predicts

SE Asia to grow 4.5% this year, IMF predicts

BANDAR SERI BEGAWAN (AFP): Southeast Asia's economy should expand by 4.5 percent this year, the International Monetary Fund (IMF) said Thursday, warning that complacency in sustaining reforms is the biggest risk.

The IMF, the Asian Development Bank (ADB) and the World Bank -- the institutions which guided many Asian countries after the 1997 financial crisis -- said they were optimistic about growth prospects this year in the region ahead of a finance ministers' meeting here this weekend.

Kunio Saito, the IMF regional director, said the 10 members of the Association of Southeast Asian Nations (ASEAN) expanded by an average 2.5 percent in 1999, many of them swinging back from negative territory.

"We hope that average growth rate for ASEAN will rise to over 4.0 percent this year, perhaps 4.5 percent," he said.

Briefing reporters on his report to a meeting of ASEAN finance and central bank deputies ahead of the finance ministers' gathering, Saito said complacency was the "biggest risk" yet for the region.

"The economic and financial situation in the region, including ASEAN, has improved markedly. The final outcome for 1999 was much better than expected," he said.

"As we underestimated the severity of the crisis, we underestimated the speed and the strength of the recovery in 1999."

The manager of the ADB's regional economic monitoring unit also briefed the deputies on the Manila-based bank's outlook for the region on Thursday.

"Signs of recovery are very encouraging but there are still areas that have to be reformed," Pradumna Rana told AFP, mentioning restructuring in the banking and corporate sectors.

"So there should not be any complacency. On the other hand, if reforms are completed, Asia would be back on its higher growth path," he said.

World Bank vice president for East Asia and the Pacific Jemal Ud-din Kassum said in an interview with CNN late Wednesday the bank has raised its economic growth forecasts this year for the countries hardest hit by the crisis, but gave no figures.

While the rebound was "impressive", these countries still "have a large unfinished reform agenda, particularly in the financial and corporate sector," he said.

The IMF's Saito cited external and internal risks to the recovery.

The external factors include the performance of the economies of the United States, Japan and Europe, he said.

Internally, the outlook would depend on how countries adjust macro-economic policies to sustain the reforms, many of them painful because they include shutting down or restructuring ailing banks and corporations owned by businessmen with political connections.

The IMF, World Bank and ADB officials noted South Korea's stunning recovery to double digit growth last year but agreed this has to slow down to avoid overheating.

They also agreed on the encouraging prospects as Indonesia grapples with reforms after the election of President Abdurrahman Wahid into office.

"In my view, the Wahid government is doing so far so good," Saito said.

The World Bank's Jemal said only 13 percent of Indonesia's debt has been restructured and 78 percent of its banking assets are in the hands of the government.

But he said the World Bank was "very comfortable with the political leadership and the economic management team."