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Asia in better position to withstand shocks: ADB

MANILA: Asian economies are recovering faster than expected from the financial crisis that convulsed the region in 1997, the Asian Development Bank said on Friday, adding that it sees the recovery strengthening this year.

"Contagion and financial volatility in the global economy seem to have faded through 1999, and the affected countries of Asia are now in a much better position to withstand any future shocks," the bank said in its Asia Recovery Report.

Growth in domestic demand and a favourable global economic environment will help fuel the recovery, the Manila-based multilateral lending agency said in the semi-annual review.

It forecast growth to accelerate this year in Indonesia, Malaysia, the Philippines, and Thailand among the crisis-hit nations, with Korea slowing to six to seven percent after a 10.2 percent rise in gross domestic product (GDP) in 1999.

But a sudden reversal in the United States' economic expansion or another recession in Japan could set back regional prospects, it warned.

"If a soft landing were to take place (in the United States)...then we don't see much of a risk to the countries in the region," Pradumna Rana, manager of the bank's regional economic monitoring unit, told a news conference.

The Japanese economy should "come out strong" from the reform and stimulus measures its government has implemented, he added.

"The external environment I suppose over the next year or so will continue to be fairly robust," Rana said, referring to the U.S. and Japanese economies.

GROWTH IN ASIA TO BE SUSTAINED

Indonesia's economic recovery has been slowed by political uncertainties and instability but with a new president at the helm, it "is poised to begin recovery in earnest this year", the bank said.

Indonesia's GDP is forecast to grow 4.0 percent in 2000 from an actual 0.23 percent in 1999, the ADB's latest figures show.

Capital has started to flow into Malaysia but it remains to be seen whether government-imposed capital controls damaged the country's economy, Rana said.

The ADB said its latest GDP growth estimate for Malaysia in 2000 is 6.0 percent from an actual 5.4 percent in 1999.

Philippine non-performing loans (NPLs) fell to 12.3 percent in December 1999 from their peak of 15 percent, but issues remain over the country's fiscal deficit and governance. Philippine GDP is forecast at 4.0 percent in 2000 from 3.2 percent in 1999, the latest ADB estimate shows.

Thailand's NPLs also declined to about 38 percent in December 1999 but there is still room for improvement, the bank said. It forecast Thai GDP to grow 4.5 percent this year.

Recovery is strongest in Korea but chaebol reform is lagging.

"If reforms are continued, in the long run, the crisis may indeed appear to be a relatively moderate disturbance in Asia's rise and dynamism," the bank's report said.

It added that Korea and Malaysia are making the fastest progress in bank and corporate restructuring in the wake of the crisis. However, corporate debt resolution in all five countries reviewed is proceeding more slowly than bank restructuring.-Reuters