Asia On Brink Of Depression: World Bank

Asia on brink of depression: World Bank

AGENCIES and LINDA CHOY in Melbourne

The World Bank warned yesterday that Asia was plunging into depression and that a global economic slump could be just months away.

Amid widespread calls for Japan to act to help the region out of its economic nose dive, the bank's senior regional official, Jean-Michel Severino, said Asia was on the threshold of a long depression.

"We are probably at the end of the first cycle of the crisis and we are entering a deep recession, or you could even use the term depression," he told the Australian Summit trade and investment conference.

"This depression could be very long-lasting if it is not handled very, very carefully."

Mr Severino, the bank's vice-president for East Asia and the Pacific, said later that the Asian crisis could spread. "The risk is there and probably we are counting in months rather than years."

He forecast growth rates for the region this year in the range of minus two to minus 15 per cent.

"The depression is being exported from one country to the other and everybody is going down at the same time," he said.

Speaking at the same meeting in Melbourne, Tung Chee-hwa said recovery was not expected for two to three years.

Responding to the recent slump in the stock market, the Chief Executive said a revival in the economy would only be in sight when external factors stabilized.

He expressed confidence, however, in the fundamentals of the region, with its high savings rate and thirst for infrastructure.

"Once we begin our recovery over the next two or three years, Asia can become one of the world's largest capital providers, borrowers as well as the largest consumer markets," he said.

Mr Tung warned that the recovery in Asia would not occur as early as many expected, and repeated his call for Japan to act urgently to stabilize the value of the yen.

"We are obviously concerned over the weakening yen," he said. "But Japan has tremendous savings and external assets. The Japanese authorities with the right policy will be able to revive her economy in due course and help stabilize the Asian region."

Mr Severino also expressed particular concern about the yen's historic weakness and warned Tokyo it must play its role as Asia's economic engine. "One has to have a dynamic Japanese economy. It's absolutely critical," he said.

Mr Severino said international central banks were co-operating in defending the yen, but the solution to the currency's woes lay in a convincing response by Tokyo.

Another speaker, Thai Commerce Minister Supachai Panitchpakdi, warned that a continued plunge in the yen could spark a second Asian currency meltdown and global recession.

Meanwhile, Malaysian Deputy Prime Minister Anwar Ibrahim accused Japan of economic "foot-dragging" and called on the United States to show the same leadership in Asia it did when it helped Mexico out of its economic morass.

"The weakness of the yen and Tokyo's slowness in putting its economy in order, particularly its foot-dragging, is threatening the fragile banking system and making the regional situation gloomy indeed," he said in Kuala Lumpur. "We shudder to think where we will be if the yen continues to slide."