Hong Kong, July 29 (Bloomberg) -- Asia has a $2 trillion problem: bad loans at banks that will keep the region from a sustainable economic rebound.
In Thailand, one-fifth of all loans are in default; in Indonesia, about one-third; and in the Philippines a quarter, according to estimates from governments and analysts. Banks in Asia will have to work through these loans before lending afresh. Until that happens, the region may not see annual growth rates of about 8 percent chalked up in the early 1990s.
Four years to the day after Thailand devalued the baht, a move that sparked a regional recession, Asian economies are again reeling. While policymakers have been quick to lay the blame for current economic woes on falling exports to the U.S., the real root of their problem lies closer to home.
``Bad loans are going to affect growth for years,'' said Tatha Ghose, chief economist for Asia at Dresdner Kleinwort Wasserstein (Asia) Ltd. in Hong Kong, who says the full impact of the problem has yet to hit and will shave at least 2 percentage points off economic growth. ``When the current downturn is over and people need to invest again, financial systems will be bottlenecked because banks won't be able to provide finance.''
Economies from Japan to Thailand and Singapore to the Philippines shrank in the first quarter. Korea today said economic growth slow by more than half this year to 4 percent. Indonesia and Malaysia expect their economies to slow.
That's a far cry from the past two years. Booming exports to the U.S. helped pull Korea, Indonesia and Thailand out of the recession of 1997-98. Those three countries needed $80 billion of International Monetary Fund loans to avoid defaulting on debt.
In Thailand, about 855 billion baht ($19 billion) or almost one fifth of all loans, are at least three months overdue. Lending by Thailand's commercial banks has fallen 10 percent this year.
``People joke you need $1 million to borrow $1 million,'' said Peter Brimble, president for policy research at Brooker Group Plc, which plans to sell about $663,000 of shares in an initial offer to fund its expansion.
``We'd eventually like to have a much better option of a mix between equity and debt financing, but right now the option doesn't really exist for loan financing,'' he said.
The problem is also deterring foreign investment, particularly in Southeast Asia. Foreign investment in Asia, excluding Japan and China, fell about 17 percent between 1997 to 2000, to just over $50 billion, as fund managers and companies sought more stable locations to put their money. A lot of money was reallocated to China.
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In Thailand, one-fifth of all loans are in default; in Indonesia, about one-third; and in the Philippines a quarter, according to estimates from governments and analysts. Banks in Asia will have to work through these loans before lending afresh. Until that happens, the region may not see annual growth rates of about 8 percent chalked up in the early 1990s.
Four years to the day after Thailand devalued the baht, a move that sparked a regional recession, Asian economies are again reeling. While policymakers have been quick to lay the blame for current economic woes on falling exports to the U.S., the real root of their problem lies closer to home.
``Bad loans are going to affect growth for years,'' said Tatha Ghose, chief economist for Asia at Dresdner Kleinwort Wasserstein (Asia) Ltd. in Hong Kong, who says the full impact of the problem has yet to hit and will shave at least 2 percentage points off economic growth. ``When the current downturn is over and people need to invest again, financial systems will be bottlenecked because banks won't be able to provide finance.''
Economies from Japan to Thailand and Singapore to the Philippines shrank in the first quarter. Korea today said economic growth slow by more than half this year to 4 percent. Indonesia and Malaysia expect their economies to slow.
That's a far cry from the past two years. Booming exports to the U.S. helped pull Korea, Indonesia and Thailand out of the recession of 1997-98. Those three countries needed $80 billion of International Monetary Fund loans to avoid defaulting on debt.
In Thailand, about 855 billion baht ($19 billion) or almost one fifth of all loans, are at least three months overdue. Lending by Thailand's commercial banks has fallen 10 percent this year.
``People joke you need $1 million to borrow $1 million,'' said Peter Brimble, president for policy research at Brooker Group Plc, which plans to sell about $663,000 of shares in an initial offer to fund its expansion.
``We'd eventually like to have a much better option of a mix between equity and debt financing, but right now the option doesn't really exist for loan financing,'' he said.
The problem is also deterring foreign investment, particularly in Southeast Asia. Foreign investment in Asia, excluding Japan and China, fell about 17 percent between 1997 to 2000, to just over $50 billion, as fund managers and companies sought more stable locations to put their money. A lot of money was reallocated to China.
heute bei www.bloomberg.com
