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Banking

Asian economies: Black swans 10 years on

Unknown risks – the black swans – could upset the Asian party.

Anniversaries are always a tempting time to reflect on past achievements. This summer will mark 10 years since the start of the Asian financial crisis that started with the run on the Thai baht and spread rapidly across the region’s currencies and economies, wreaking havoc. A decade on and, with the possible exception of Thailand, Asian economies have much to celebrate.

In 1998, the economies of Indonesia, Malaysia, the Philippines, South Korea and Thailand, the countries worst affected by the crisis, shrank by almost 8% on average. The same economies grew at a respectable 5.4% in 2006. Government finances have been strengthened and capital controls mostly removed. The capitalization and regulation of local banks have improved significantly and Asian stock markets are more accessible to foreigners.

Although the picture for Asia seems unremittingly positive, it might be premature to open the champagne. There are several alarming similarities between Asia 10 years ago and now. In the decade before the crisis, the economies of Indonesia, Malaysia, the Philippines, Singapore and Thailand grew on average by 8% a year, according to the IMF.

Rob Subbaraman, regional economist at Lehman Brothers in Hong Kong, estimates that the GDP of Asia ex-Japan will grow by 8% in 2007 and 2008.

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