Regions and Countries

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p. 17 of 47 BACK | NEXT Developing Asia and the Pacific The global economy Newly industrialized economies Central Asian republics, Azerbaijan and Mongolia People’s Republic of China Southeast Asia Cambodia Indonesia Lao People’s Democratic Republic Malaysia Myanmar Philippines Thailand Viet Nam East Timor South Asia The Pacific

Southeast Asia

In 2000, the Southeast Asian economies maintained their growth momentum that began in 1999. All these economies registered positive growth rates, with Malaysia recording the highest at 8.5 percent, and Thailand and the Philippines the lowest at about 4.0 percent. Malaysia achieved substantial progress in financial and corporate restructuring, which contributed to its sound growth. Nonperforming loans in Malaysia decreased significantly by the end of 2000, thereby enabling the local banks to increase the supply of credit; the economic recovery, in turn, permitted borrowers to accelerate debt service. In contrast, the restructuring in Indonesia was delayed for financial and political reasons, resulting in growth below the country’s potential. In the Philippines, the Mindanao conflict and political uncertainties adversely affected the economy.

Overall, GDP growth was supported by growing exports and an upturn in fixed investment and consumption. Exports enjoyed impressive growth in Indonesia, Malaysia, Thailand, and Viet Nam, which in turn led to buoyant imports. This caused the current account balances, as a percent of GDP, to deteriorate in all countries in 2000. The continuing current account surpluses, coupled with increased receipts of official capital flows over the last two to three years, greatly strengthened the external reserve position of some countries. Indonesia saw a much stabilized rate of inflation in 2000, although it remained high compared with some neighboring economies. Consumer prices rose by 4.4 percent in the Philippines because of the persistent fiscal deficit and increased oil prices. Inflation in other countries remained relatively stable.

Unemployment rates remained much higher than in the precrisis period in most countries, while progress in poverty reduction was mixed. Poverty incidence in Indonesia, which rose dramatically from 11 percent in 1996 to 24 percent in 1998, decreased in 1999. However, in Thailand, poverty incidence increased from 12.9 percent in 1998 to 15.9 percent in 1999. Because the current economic recovery is not strong enough to reduce poverty in all countries, except for Malaysia, economic growth needs to be accelerated and made more broad-based, and social assistance schemes strengthened. Creating job opportunities in the rural and agriculture sectors and labor-intensive small enterprises is of paramount importance in this context. Diffusion of information and communication technology is also needed to avoid a possible digital divide in most economies in Southeast Asia.

Regional conflicts in Indonesia need to be addressed urgently to improve investor confidence and to facilitate domestic economic activity and international trade. Expediting financial and corporate restructuring is likewise critical in Indonesia and Thailand. In the transitional economies—Cambodia, Lao People’s Democratic Republic, and Viet Nam—broadening the industrial base, reducing poverty, and boosting outward-oriented growth are vital to sustaining growth. Reducing poverty and raising socioeconomic welfare require a dynamic industry sector and a more productive agriculture sector for exports and jobs.

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