Growth still elusive: EPA

Business Asia, July 5, 1999

Slower investment and a decline in growth will hold back Asia's growth over the next decade even as the region recovers from its economic crisis, according to Japan's Economic Planning Agency (EPA).

Asian economies are on track for a gradual recovery this year, but the rocketing growth rates they enjoyed before the crisis will remain elusive, the EPA said.

"On the whole, Asian economies are bottoming out right now, but the recovery is at the initial stage and the recovery is also very much supported by the stimulative financial policies of each country," said Mr Mitsuo Hosen, the EPA's director of overseas research.

The EPA report said many Asian economies had already been overheating in the run-up to the 1997 currency crisis.

South Korea remained the one exception until mid-1997, but even that country's manufacturing had been showing progressively smaller returns on capital since 1995.

Mr Hosen cautioned that a recovery hinges on more progress in financial sector reform and a continued recovery in exports and foreign investment. Japan could play a supportive role for the region by growing faster and continuing to provide financing, he said.

But he remained cautious over whether recent trade data suggested a turnaround in Japan's imports from the region was already under way.

Japan's May trade data showed its imports from Asia increased by 7.7 per cent year-on-year.

"It is difficult to take one (set of) data and draw any conclusions. I'm not sure if this increase in imports will continue in Japan," he said.

Mr Hosen stressed the importance of financial reform, saying Asian countries still face domestic credit crunches.

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