Southeast Asia bouncing back in recovery

Southeast Asia bouncing back in recovery

SINGAPORE (AFP): Key Southeast Asian economies are expected to bounce back with strong growth rates in 1999 in a stunning export-led recovery from recession, regional experts say.

The resurgence is fueled also by higher fiscal spending and domestic consumption as well as lower interest rates and weaker currencies.

Excepting Indonesia, which could languish in negative growth, major Southeast Asian nations should end 1999 with gross domestic product (GDP) growth rates ranging from 2.9 percent to 6.3 percent, say economists from three foreign banks and an investment house polled by AFP.

They are Standard Chartered, Societe Generale and ABN-AMRO banks and Vickers Ballas investment house.

They forecast Singapore's GDP growth at 5.0 to 6.3 percent, Malaysia at 3.0 to 5.6 percent, Thailand at 4.0 to 4.7 percent, the Philippines at 2.9 to 3.4 percent and Indonesia at minus 'n to minus 0.1 percent.

It was a rapid climb-back for the region from mostly negative growth in 1998, a year after the region plunged into its worst recession in decades due to a financial crisis which erupted in mid-1997.

The crisis had pushed GDP growth last year to 0.3 percent in Singapore, minus 7.6 percent in Malaysia, minus 10 percent in Thailand, minus 0.5 in the Philippines and minus 13.2 percent in Indonesia.

Eddie Lee, regional economist with Vickers Ballas, said the Southeast Asian recovery was stunning because of two key reasons -- it defied text book theory and rode on export growth fuelled largely by Asia.

"It was a rare 'V' shaped swift bounce-back for Southeast Asia rather than the traditional 'U' shaped recovery, where economies should hit the bottom and hover around there for sometime before picking up," Lee said.

He said studies showed Asia itself absorbed the bulk of Southeast Asian exports and played a key role in the recovery.

Citing figures in the second quarter of 1999, he said, for example, the United States contributed "nothing" to Singapore's export growth, which largely came from Japan and other Asian nations.

In Malaysia's case, Japan and the rest of Asia contributed 47 percent to export growth while the United States accounted for a lower 30 percent.

Philip Wee, treasury economist with Standard Chartered bank, said Southeast Asia had experienced the "first phase of recovery which was very much export-led, underpinned by global electronics demand, and backed by increased fiscal spending by governments.

"The challenge now is to broaden growth and stimulate domestic demand as an important objective," he said.

ABN-AMRO said with the exception of Indonesia and Thailand, private consumption growth in the region reverted to positive territory in the second quarter. But recent figures suggest even a turnaround in Thailand.

"Reflecting the recovery in domestic demand and increased exports, import growth is rebounding strongly across the region," it said.

ABN-AMRO regional economist Mangal Goswami said the region's largely high savings rate cushioned the recovery from a very low base.

"The growth numbers have really been a surprise on the upside -- with the distinct 'V' shaped recovery driven by strong inventory cycles and firmer domestic demand," he said.

Lee of Vickers Ballas said Southeast Asia, once the fastest growing region in the world, would regain its pre-crisis brisk level growth rates by 2000.

Standard Chartered, ABN-AMRO and Vickers Ballas forecast Indonesia's GDP growth to contract by one percent or less in 1999 as expansion had resumed there only from the second quarter and off a very low base.

Societe Generale said Indonesia's GDP rate for the fiscal year to March 2000 would turn positive at 2.5 percent growth.