The Market Economies Of Southeast Asia In 1986 (1987)

The weighted average growth in the ASEAN countries as a whole fell from 4.6 per cent in 1984 to 0.5 per cent in 1985. In the course of 1985, expectations were that growth would pick up in 1986 but this did not materialize, and the Nomura Research Institute estimates 1986 growth to be in the order of 0.6 per cent (report in the Business Times [Singapore], 19 December 1986). Commodity prices continued to fall and the failure of the indus trialized countries to show strong growth adversely affected the performance of the Southeast Asian market economies. Real output in the industrialized countries grew by only 2.7 per cent in 1986 as compared to 3.0 per cent in 1985. While ASEAN countries used to grow faster than the industrialized countries, only Thailand and Brunei recorded a higher rate of growth than the industrialized countries in 1986. However there are signs that this poor performance ? poor relative to earlier years ? can be reversed in 1987 with overall growth averaging a modest 2 per cent. The world economy is in a transition phase, adapting to major changes such as a large shift in the pattern of exchange rates, sharp reductions in interest rates and energy prices, and the planned strengthening in the U.S. fiscal position. For the industrial countries the key policy issue is how to sustain a satisfactory rate of demand growth while working toward the elimination of the financial imbalances between countries that have threatened the sustainability of expansion (International Monetary Fund, World Economic Outlook, October 1986). The year 1986 saw the beginnings of profound changes to Asian economies brought about by the 22 September 1985 summit of Finance Ministers from the five major industrial nations. This summit agreed on concerted steps to weaken the dollar, particularly against the yen. The yen has since then strengthened by about 40 per cent against the dollar. Japan's exports have become more expensive and its overseas sales have dropped in yen terms, driving down the country's growth rate which in fact turned negative in real terms in the first quarter of 1986. Consequently the Asian nations that compete with Japan for export markets, particularly those which are linked to the dollar, are enjoying a boom such as South Korea, Taiwan and Hongkong. Cheap oil and low interest rates have added to the windfall. However only Thailand among the market Southeast Asian economies has shown growth, comparable to 1985, of about 4 per cent for 1986. Singapore is expected to grow by about 1.9 per cent in real terms for 1986, itself a significant reversal from the minus 1.8 per cent in 1985 while Malaysia is expected to grow by about 1.0 per cent, also an improvement over the minus 1.0 per cent growth of 1985. Brunei's expected growth for 1986 is estimated by the Nomura Research Institute to be 4 per cent. According to that same source, the Philippines is expected to decline by 0.1 per cent and Indonesia by 1.1 per cent in 1986, the Philippine figure a significant improvement over the 3.8 per cent decline in 1985. Of all the market Southeast Asian countries, Indonesia has worsened most in its 1986 economic position as it had a positive 1.3 per