Asian economies set to recover: Shift in funds away from US to region
Parista Yuthamanop
Asian economies were expected to rebound next year as investors shift funds away from the United States into the region, according to economists at Standard Chartered Bank.
Gerard Lyons, chief economist for the bank, said the one-half point cut in interest rates by the US Federal Reserve earlier this month would help offset the negative effect on market sentiment from uncertainties over a war in Iraq.
He said the US economy next year was expected to be stable as economies adjusted their balance sheet and stimulus policies were adopted. The US dollar was expected to depreciate, leading to gains in Asian currencies.
Depreciation would lead to Asian central banks, major buyers of dollar-denominated assets, to shift their weightings more towards euro assets next year.
Stronger regional currencies and low inflation would help maintain low interest rates and boost Asian economies.
Mr Lyons said that the global economy would be driven by three main forces _ moderate growth, low inflation and interest rates and a portfolio shift by investors seeking higher yields.
Regional central banks would restrain from intervening in the currency markets in order to maintain high foreign reserves as a buffer against potential economic shocks.
For Thailand, Standard Chartered said the economy was not headed towards deflation, as low price pressures were more the result of squeezed margins in the manufacturing sector.
Mr Lyons said the Fed was expected to maintain low interest rates through at least the first half of 2003.
A war in Iraq in any case would have a minimal effect on the economy, with oil prices expected to fall sharply in the aftermath to as low as $15 per barrel.
Steve Brice, Standard Chartered chief economist for Southeast Asia, said investment sentiment in stocks was expected to improve next year.
Capital inflows would help push the baht up to 38.5 to the US dollar by the end of the third quarter of 2003 before falling back to around 39 by the end of the year.
Mr Brice said the currency appreciation would be fairly moderate, and thus have a limited impact on the economy.
Usara Wilaipich, an economist for Standard Chartered Thailand, said the economy was expected to grow next year by 3.5%, with growth slowing in the first quarter.
Expansive fiscal and monetary policies would help the economy to maintain growth despite external uncertainties, with the Bank of Thailand expected to reduce rates to 1.5% in 2003, she said.
Domestic consumption still had potential to expand given that Thai household debt remained relatively low, while higher-than-projected tax collections would give the government room to continue fiscal stimulus programmes.
bangkokpost.com |
