SE Asian economies are more resilient: MAS

SE Asian economies are more resilient: MAS

SINGAPORE (AFP): Southeast Asian economies have the strength to shield themselves from the effects of Mexican-style financial crunch elsewhere in the world, according to the Monetary Authority of Singapore.

Cooperation among central banks in the region "had deepened and will continue to deepen," aiding management of exchange rate policies if regional currencies came under speculative attack, it said.

A sudden devaluation of the Mexican peso in December 1994 resulting from the country's huge current account deficit sent the so-called exotic currencies of Southeast Asia into a tailspin in early 1995.

The Indonesian rupiah, Malaysian ringgit, Philippine peso, Thai baht and even the Hong Kong and Singapore dollars came under pressure as foreign investors feared the crisis would spread to emerging Asian markets.

"Almost two years have passed and there is now a much better international appreciation for the good fundamentals here (Southeast Asia)," Singapore's de facto central bank told AFX- Asia, an AFP-affiliated financial news wire.

"A currency crisis in another part of the world is unlikely to tar Asian countries in the same way as before," the Monetary Authority of Singapore (MAS) said in a written reply to questions submitted by AFX-Asia.

The MAS explained that the Mexican peso crisis spread to Southeast Asia "largely due to a lack of understanding by foreign investors of the fundamental economic and financial conditions" in the region.

Most Southeast Asian central banks have signed currency repurchase agreements to signal to the market the widening pool of ready credit available to maintain currency stability in the region, analysts say.

The MAS said cooperation among the central banks would not in itself deter speculative attacks on regional currencies.

"But should any speculative attacks occur, the rapid and easy exchange of information that has developed among central banks and the network of bilateral repurchase agreements already in place would give flexibility to central banks in managing their exchange rate policies," it said.

On economic growth in the Association of Southeast Asian Nations (ASEAN) area, MAS said it expected growth in the region to slow down to a still healthy rate over the next two years.

It said however that this moderation in growth due largely to a slowdown in exports, in some cases, provided a welcome respite from overheating.

Apart from Singapore, ASEAN comprises Brunei, Indonesia, Malaysia, the Philippines, Thailand and Vietnam.

Within ASEAN, exports of Singapore and Malaysia in particular had been affected by the downturn in the demand for electronics, MAS said.

Electronics account for about 60 percent of Singapore's domestic exports and half of Malaysia's exports.

Thailand and Indonesia, which are less dependent on electronics exports, have also seen weak growth for exports of lower-end products such as textiles and footwear, MAS said.