Nonetheless, rising reserves and the improved term structure of foreign debt have led to a substantial improvement in the external position of the region compared to the pre-crisis position. Weak external demand, combined with softening internal demand as a result of reforms in the state enterprises and the financial system, led to a deflationary cycle. The main weakness in many countries has appeared in the equity markets. Gross financial capital inflows into East Asia appeared to have picked up in the first half of 2000 compared to 1999. However, the flows have been dominated by some large issues, particularly by China.
Net flows remain negative, and in particular, Their local positions.
Export growth, sizzling in 2000, should ease considerably in 2001 and 2002 in line with slower external growth. But these risks have generally been pushed back in time. And domestic risks in aggregate have diminished from past high levels. The two most vulnerable large countries are Indonesia and the Philippines. The factors underlying slower growth vary from country to country.