Is Asia on the road to economic recovery?
Calgary Herald, July 2
TOKYO (AP) - Two years after Asia's financial crisis began,
economists are busy debating whether the region is on the road to a full
recovery. But even the naysayers are amazed by the remarkable rebound
of its stock and currency markets.
In Thailand, where the crisis began July 2, 1997, when the baht currency
was floated and then collapsed, the Central Bank is now considering
buying U.S. dollars to slow its rebound.
In Indonesia, one of the worst victims, the stock market has bounced
back a remarkable 160 per cent from last year's low point. The rupiah
currency, which fell so far it became a laughingstock on world markets, is
now 150 per cent higher.
Even Japan, the world's second largest economy, is struggling to prevent
the yen from rising against the U.S. dollar. The reason? That would hurt
exporters such as Sony and Toyota, crucial assets in a country battling its
worst recession since the Second World War.
Strong recoveries also have been seen on the financial markets of South
Korea, Singapore, Malaysia, Hong Kong, the Philippines, Australia and
New Zealand.
P.K. Basu, chief economist for Southeast Asia at Credit Suisse First
Boston in Singapore, said prolonged rallies such as these are a sign of
hope for the entire region.
"Just as all of Asia went down together, all of Asia can rise together. A
rising tide will lift all boats in Asia," he said.
Increased demand in countries that recover the fastest will drive recovery
in the rest of the region, Basu said.
Even Japan, whose economy is bigger than all the other Asian ones
combined, could be helped by increased demand from its recovering
neighbours, given how much they import from Japan, he said.
Other economists are less optimistic.
Market rallies such as these "are not based on fundamentals. They are
based on expectations," said Bruce Gale, an analyst for Political and
Economic Risk Consultancy, a research firm based in Hong Kong.
"This euphoria may be a bit premature."
Worse still, Gale said, such improvements could lead governments to
delay painful economic measures demanded by the International
Monetary Fund in an effort to prevent another crisis.
They include reducing Asia's relationship between governments and
businesses that led to a lot of bad investments and redesigning banking
sectors.
Asia's turmoil began in 1997, with a huge and sudden withdrawal of
foreign investment from countries such as Thailand and their fast-growing
economies, setting off a banking and a currency crisis.
The baht nose-dived and the Thai financial system quickly collapsed.
Meltdowns followed across Asia and they eventually spread to emerging
markets from Russia to Latin America.
Even Wall Street suffered some big losses as investors worried whether
the strong U.S. economy could withstand a global crisis.
Since then, Asian markets have stabilized or improved dramatically, and
some of the region's economies are recovering.
South Korea, the largest Asian economy to require an IMF bailout, saw
its gross domestic product grow by 4.6 per cent in the first quarter of this
year. Singapore's grew by 1.2 per cent.
Even the Indonesian economy grew by 1.82 per cent in the second
quarter, compared with a year earlier. It was the first year-to-year
pickup in growth since the fourth quarter of 1997.
But unemployment remains high across the region and there is no sign
huge numbers of poor people are falling.
In fact, a recent World Bank report said the world's population of
people in abject poverty grew by 200 million in the last decade. It said
one main reason was the Asian crisis and it called for bailout programs
and preventative measures to provide urgent relief for suffering people,
not just suffering economies.
Even in South Korea, where financial markets appear healthy again,
some economists said it's too early to make too much of that.
"The markets show that South Korea has come a long way since the
breakout of the crisis," said Kim Byong-joo, an economics professor at
Seoul's Sogang University.
"Most economists, including me, agree the foreign currency crisis that
triggered the financial difficulties is definitely over.
"But many also believe that the end of the currency crisis means only the
beginning of our economic recovery. Now that we have relatively stable
markets, it is time to push hard for corporate restructuring and financial
reforms," Kim said. |
