The seven members of the Association of Southeast Asian Nations (ASEAN) - Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam - have been at the centre of the Asian financial storm. According to estimates by Goldman Sachs compiled just ahead of the crisis, the medium-term growth potential of the ASEAN nations is 6%-8% a year. The question now is whether, and how quickly, they can get back on to that growth track.
The first priority appears to be to prevent further currency depreciation.
According to C H Kwan of the Nomura Research Institute in Tokyo: 'The ASEAN countries ... are trying hard to stop further depreciation of their currencies in order to stop aggravating their already weak financial systems.
Companies in those countries with foreign-currency debt have found the repayment burden in local currency rising in proportion to the scale of the depreciation. By increasing the risk of default, currency depreciation has therefore aggravated the bad debt situation already plaguing domestic financial institutions.'
Stabilising the short-term financial situation is a necessary condition for the recovery process. On its own, however, it will not be enough.
In countries where the state can have a corrupting influence, privatisation and deregulation are also required. Forecasts from HSBC-James Capel suggest that, while there will be no overall ASEAN economic growth this year, an export-led recovery should begin next year, with growth of perhaps 4%.
Indonesia has been pivotal in the Asian crisis, not least because of President Suharto and the network of banks, companies and projects associated with members of his family. The question is whether Suharto, who is central to the Indonesian problem, can also carry through its solution. The collapse of the rupiah and the emergence of serious food shortages has pushed inflation towards 20% and threatens a further rise.
Malaysia's prime minister, Mahathir Mohammed, has been most vocal in his criticism of the role of international financial speculation in bringing about his country's woes, although the ringgit has suffered less than the Indonesia rupiah and Thai baht. The Malaysian economy should achieve growth this year, of about 3%, in contrast to a likely 5% contraction for Indonesia.
For the Philippines, where growth remained positive (a little under 5%) in the year to the fourth quarter of 1997, the prospect is of a relatively mild recession - perhaps a 1.5% decline in GDP this year - followed by 4% growth next year. One key concern, however, is inflation, which will rise into the 15%-20% range this year, alongside a similar level of interest rates.
Singapore can claim to be a haven of relative tranquillity within the ASEAN group. Most forecasters predict growth this year of perhaps 3% or 4%, followed by a speedy return to something like long-term potential, 6%-plus growth next year. Singapore, so far, has been proof that Asian currency contagion can be contained. But one longer-term question will concern its competitiveness against cheap currency countries elsewhere in the region.
If Thailand was where the crisis began, it is also going to be where it lingers. A 3% contraction in the economy this year is likely to be followed by at least two further years of sub-trend growth. As in Indonesia and the Philippines, 15%-20% inflation is likely this year, largely thanks to a reaction to currency depreciation.