In Bangkok this time last year the "formerly rich" were turning up at weekends at an outdoor market beside Wasun's car showrooms in a residential area. There these casualties of the Asian crisis tried to sell off their possessions, including limousines, to avoid personal ruin. At around the same time, the annual International Motor Show downtown was losing money, with only 1,480 orders from 1.5 million people attending.
A year on, however, and things are looking up. Some 2 million people turned up at the 20th Bangkok International Motor Show last week, and dealers secured more than 3,000 orders, including 200 Mercedes-Benz luxury new S-Class models.
Taking this as a rough guide, the trend in the country where the Asian economic crisis began in 1997 is upwards, and confirms what many economists in the region are predicting, that a recovery is under way.
The Siam Commercial Bank predicted in a report this week that Thailand's economic growth this year would be 1-2 per cent of gross domestic production. It noted that confidence was rising that the government's stimulus package would help shore up the economy, and concluded that the economy would improve in the second quarter of this year.
After Thailand, the second country to fall in the Asian crisis was Indonesia, and here too there are signs of recovery, despite ethnic and religious conflicts. Analysts say that Indonesia could return to growth before the end of the year having already restored monetary discipline. The Standard & Poor's rating agency last week said the outlook for Indonesia's foreign and local currency debt was now stable.
This improvement has followed efforts by the Indonesian central bank, backed by the International Monetary Fund, to control the monetary situation and reduce spiralling costs. Inflation is expected to subside to 25 per cent this year from 70 per cent last year. Indonesia has also been aided by an agreement with foreign banks to allow more time to local banks to repay their loans.
Indonesia's economy shrank by 13 per cent in 1998-99, but IMF deputy managing director, Mr Stanley Fischer, said an upturn in economic activity in Indonesia could start in the second half of 1999.
Meanwhile, neighbouring Malaysia is in a self-congratulatory mood, having survived last year's recessionary forces better than most of its neighbours. Taking car sales again as a guide, business and consumer confidence is improving; in February 19,035 cars were sold for private use, compared to just 5,724 in February last year. Malaysia recorded a record trade surplus in 1998 and the central bank governor, Ali Abul Hassan Sulaiman has forecast a 12 per cent GDP growth this year. "The recession has bottomed out and the economy is expected to pick up in the second half year," he said.
In next-door Singapore, business confidence also seems to be back after a technical recession. On Tuesday the Singapore stock market's Straits Times Index closed above the 1,600-point mark for the first time in 17 months and is still rising. It has now nearly doubled in value since September last year. Investment strategists say that many foreign fund managers are coming back to Asia, and Singapore is particularly attractive. Stock markets in Australia, South Korea and Thailand have all shown improved turnovers this year, adding to business sentiment and domestic demand, though the surge of liquidity seems to have passed by Hong Kong. The former British colony again contracted in the first quarter, partly because it remains expensive due to its peg to the US dollar. The luxury residential property market is showing signs of stabilising with increased investment interest, and the stock market has gained 15 per cent since the end of January. But a poll of Hong Kong analysts this week predicted the stock market would retreat this quarter under the influence of Wall Street and other overseas markets.
In South Korea, bailed out at the end of 1997 by the IMF, improved domestic demand and a stronger currency have stimulated imports of consumer and capital goods but exports have fallen by 14 per cent on a year earlier. A survey of South Korean businesses published this week showed most expected the economy to improve in April, though they said it was too early to conclude the economy was on the road to recovery.
Japan's economic health remains a key factor in a broad Asian recovery. "For this year, the numbers are going to look better in Asia, but a lot of that is really arithmetic growth," said Mr Ron Leven, of Asian markets research at JP Morgan. "In the long run, it's hard to see this region really turning around until the Japanese economy does; it's just too important a market for this region's exports."
There are some signs of a recovery in Tokyo, with Japan's market soaring 14.79 per cent since mid-February to more than 16,000 points on a wave of foreign buying. A survey of business confidence published this week showed marginal improvement in March, the first in seven months. Finance Minister Kiichi Miyazawa said this proved that the worst was over for the Japanese economy.
The Bank of Japan used the figures to claim that after nearly two years of deepening pessimism, business sentiment in Japan has finally turned the corner. But there is still little solid evidence that the Japanese government's reflation strategy is working and unemployment continues to rise. Nevertheless leading Japanese manufacturers expect an accelerating improvement in conditions in coming months and Japan's Economic Planning Agency said its data at least showed that the economy has stopped declining.
Hopes of a recovery in the Asia pacific region have been bolstered generally by an increase in industrial output, lower inflation rates, healthy current account surpluses and rebuilt foreign reserves. The IMF, which bore the brunt of criticisms when its autumn 1997 measures failed to stop the slide into crisis in Thailand, South Korea and Indonesia, now claims that its prescriptions have worked and are showing positive effects. On Monday, Mr Kunio Saito, director of the IMF regional office for Asia and the Pacific, said that, now that the primary objective of stabilising these economies had been achieved, the next phase was to restore growth.
He admitted that the process would be difficult, and would require extensive banking and corporate sector restructuring. He believed that Asia would bounce back due to its inherent fundamentals, ranging from high savings and investment rates, to hard-working people, relatively low wages and good productivity. Structural reform was the key ingredient to recovery, he said. "It's going to be painful and time-consuming," he said. "But this process will have to be followed through seriously if sustainable growth is to resume."
