Make your own free website on Tripod.com
Home
Baht/economic crisis
Banking crisis
Overdrive
General issues
My profile
Barns and Noble
Thanong's Poll
Message Board
Chat Room

 

 

Send FREE Greetings!

 

 

ROXY.com Is The Fastest Way To Shop!

 

 

 

 

 

 

 

 

Try AOL Now!  up to 700 Hours FREE

 

 

Slowing US economy helps Asian recovery

November 20, 1999 -- A MODEST recession in the US was not likely to deal a setback to the economic recovery of Thailand and the rest of Asia since capital would flow back to the region to mitigate the fall-out effects from the weakening of the US markets, said a deputy director of research of the International Monetary Fund.

''There is a good chance that the rest of the world will not be too badly affected by a decline in the US, if it is not a sharp decline or if it is only a modest recession,'' said Flemming Larsen, who yesterday presented a global economic outlook at a Bangkok seminar.

Noting that the Asian crisis and weakness in the European and Japanese economies had actually benefitted the US as witnessed by the flow of global capital into the US, Larsen said that any US slowdown or adjustment in the years ahead was likely to lead to an outflow of capital back to Asia to cushion the recovery.

The US economic expansion has exceeded expectations, not only in labour productivity growth but also in the rapid expansion of fixed investment and capital stock in recent years and in faster technical progress. The IMF has projected US growth this year at 3.7 per cent and at 2.6 per cent for next year.

But a slowdown and adjustment is inevitable, raising concerns over the US economy's ability to achieve a soft landing. The US Federal Reserve Bank Board's recent measure nudging up short-term interest rates by another quarter of a percentage point reflects a forward-looking move to contain inflationary pressure. The IMF does not foresee any sharp recession in the US.

Turning to Thailand and the region, Larsen said Thailand would continue to experience a V-shaped recovery next year, with a growth rate forecast of 4 per cent compared to 3 to 4 per cent this year. This, Larsen said, was a conservative estimate, with a bias toward upward revision for Thailand.

Korea has made an even stronger bounce-back, with 1999 GDP growth revised up from 6.5 per cent to 9 per cent.

But he warned that the recovery in Thailand and the region was only ''cyclical'' after a severe correction over the past two years when trade and investment collapsed. ''The recovery represents a cyclical upturn, with a return of confidence, increasing imports and export recovery,'' Larsen said.

''I would not be surprised to revise upward the predictions of economic growth of the crisis countries. But that does not necessarily mean that we'll see rapid growth in the long run.''

Sustainable or long-term growth depends on commitment towards economic and financial reform, presently being undertaken by the crisis-hit countries. ''The region has great potential for a return to strong growth, but this depends on the structural reform so that the problem in the 1990s will not be repeated in the future,'' Larsen said.

He warned that if regional governments reneged on their commitments to reform, there would be a setback in financial market confidence, the lack of which would derail the economic recovery.

At present, crisis countries in Asia were still resorting to lax fiscal and monetary policies to stimulate growth, but in the years ahead the fiscal support would have to be consolidated and the monetary ease would have to be tightened, Larsen said.

BY THANONG KHANTHONG

 

Ask Jeeves!

 

 

dot com mail,  dot com biz card and Web Registration

 

 

 

 

www.NoMonthlyFees.com

 

 

 

 

 

 

 

PC Hardware

 

 

Home ] Baht/economic crisis ] Banking crisis ] Overdrive ] General issues ] My profile ] Barns and Noble ] Thanong's Poll ] Message Board ] Chat Room ]