| |
 |
Asian economy: defective recovery
|
THE year 2000 has seen a surprisingly strong economic recovery in Asia, but behind the robust growth looms weakness that needs to be urgently addressed.
Since the beginning of last year, the regional economy, driven by strong export growth and revived domestic demand, has recovered fast. Flexible exchange rates, in most economies, low short-term debt levels, and strong reserve positions have helped the region achieve macroeconomic stability.
The best performer was Hong Kong, China, which posted GDP growth of 11.7 per cent in the first nine months, followed by South Korea, Singapore and Malaysia.
Asia's economic performance was so impressive that forecasters repeatedly revised upwards their forecasts for the region for the whole year.
However, the strong growth has exposed one major vulnerability of Asia — heavy dependence on exports, dominated by electronics products.
So far, the United States is the single largest market for exports from Asia. On average, about one-fourth of the total exports of Asia's major economies go to the United States, a large portion of which are IT and electronics related products.
As a result, analysts say, a slowdown in the US economy, which has already begun, and an expected decrease of demand for electronics products in the world market will undoubtedly hurt the Asian economy.
It should be reminded that exports, as an “engine” of the Asian economy for years, started to fall in 1996 when the world electronics market saw a cyclical downturn. The fall caused a sharp rise in current account deficits in Southeast Asia, which contributed to the outbreak of the regional financial crisis in 1997.
Another major weakness is the slow pace of bank and corporate restructuring in the countries hardest hit by the financial crisis.Although progress has been made in cleaning up banks and restructuring corporate debts in Indonesia, Malaysia, the Philippines, South Korea, and Thailand, restructuring still has a long way to go.
Banks were still plagued by inadequate capitalization and a large share of Non-performing Loans (NPLs), and were reluctant to lend. Credit growth remains weak in general.
Although a substantial proportion of corporate debts that were referred for voluntary resolution in Malaysia, South Korea and Thailand has been restructured, many firms remained heavily indebted and were unable to service their debt obligations.
The slow pace of bank and corporate restructuring, together with volatility in financial markets, and, in some countries, political uncertainties, dampened investor expectations and eroded confidence.
In the first nine months of 2000, the Philippines saw a net foreign portfolio outflow of US$338 million. Foreign investors reportedly sold off a net US$700 million in Thai stocks in the year.
The International Monetary Fund forecast in September that net direct foreign investments to the five crisis countries last year would be only US$9.1 billion, much less than the US$13.1 billion in the previous year.
On Asian economic performance in 2000, many economists share the view that the underlying weaknesses need to be urgently addressed if Asia is to sustain steady growth and reduce vulnerability to external shocks. (Xinhua)
|
|
|
|
