MAARSSEN, Netherlands (June 2) - To understand the Asian economies, you'll need more than just statistics, according to Stephen Roach, chief economist of the Morgan - Stanley bank. His style is to travel the area extensively and talk to the people that matter. His findings are far less than rosy…although many Asian economies have shown growth figures that are to be envied (4.6% for '03 - and 5.7% is expected by the Asian Development Bank for '04) governments are slow in implementing much needed updates in their financial systems. According to Roach, without control and regulation, the current Asian financial systems could soon built-up a mass of dangerous credits that might lead to economical upheaval. Just like the Asian crises in 1997, and not much has changed since than. Private debts are on the increase too, stimulated by low interest rates.
The chief economist of the Morgan - Stanley bank also notes that the economies in the region have three important variables, all of which will deteriorate in the coming months: the US interest rates, the prices of raw materials and the Chinese economy. The US will probably increase the interest for the first time at the end of June, which will be the start of a climbing scale. This will lure capital invested in Asia back to the US. The rising prices for raw materials will hit extra hard in the region, as many economies are industry driven. And China as the 'big engine' of the region will start to slow down soon - to cool down the run-away industry. This will have its effect on countries, which have a large export stream to China, like Malaysia. These negative developments can still be stopped, provided economic changes are made soon, that the US banks will raise interest in small increments and base material price will not (continue to) sky-rocket.
On the positive side is the fact that home-consumption has risen all over the region, so that shifts in overseas markets can be dealt with more easily.(MH)