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From: AFP
Date: 04 May 1999
Time: 15:37:45
The International Monetary Fund (IMF) has warned against complacency over reforms in crisis-hit Asia, and a fall-out from pessimism over economic growth in Japan and hotly-contested elections in Indonesia.
IMF Deputy Managing Director Stanley Fischer, speaking to journalists in Singapore and in Hong Kong via video link from Washington late today, said a two-month-old optimism surrounding the global economy was 'fragile' and countries had to be mindful of risks on the horizon.
"One is that structural reform in the financial and corporate sectors getting underway in Korea and Thailand could falter as a result of the lifting of the sense of crisis, a complacency about the crisis. It is a very real concern," he said.
There are "solid grounds" for believing the Japanese economy would recover this year on the back of strong measures taken to restructure its banking sector last year, but scepticism abounded, he said.
But "the other concern was the contrast between the feeling of Japan and the performance in the fourth quarter, where growth was less than expected could be resolved in the wrong direction, mainly a pessimistic direction", he said.
Japan's economy shrank 2.8 per cent in 1998, its worst contraction since World War II, and it recorded a contraction of 0.8 per cent in the three months to December.
Today, US President Bill Clinton urged visiting Japanese Prime Minister Keizo Obuchi to 'use all available tools' to pull Japan out of recession, as Obuchi insisted a major turnaround was imminent.
The call was similar to the one made by the IMF's policymaking committee in its semi-annual meeting in Washington a week ago.
But the Japanese premier dismissed the view that Tokyo would need additional spending because measures taken so far could run out of steam later this year.
Fischer called for improvements in the transparency of Japanese fiscal policy which could help outsiders understand measures Tokyo is taking to revive its economy.
On the situation in Indonesia, he said stakes were high as the nation geared up for its first general elections in June amid bloody riots in parts of the archipelago.
"You know and we know if the security situation deteriorates, if the government that eventually takes office is very weak, it could be that the policies that are now being put in place would be abandoned," he said.
The IMF was working with Jakarta to ensure that the Indonesian economy was improving before the elections to avoid the riots that ensued prior to and following the fall of former strongman Suharto last year.
"We will continue operating with them after the elections," Fischer said.
Hovering over all these risks were the possibility of the United States's economy slowing down.
"Of course one has to be worried. It is unlikely that this rate of growth (in the US) can continue.
"Eventually there will be a recession (in the US) but there's no reason to fear one in the very near future or in the near future and the slowdown of growth rather than negative growth is a more likely scenario," he said.
Asked to comment on Malaysia, he noted that the return of confidence in both Malaysian and Asian economies dispelled justification for Malaysia's imposition of capital controls last year.
"We're not going to get a lot of evidence on the way of capital controls following the stabilisation of financial conditions in Malaysia because they stabilised also in other countries that didn't have capital controls," he said.
He added the IMF acknowledged the efforts of China's leadership to strengthen its financial sector and restructure its debt-laden state-owned enterprises.