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MADRID: Once the global credit crunch eases Asia will see the return
of the large capital inflows that put the squeeze on their
economies, a senior Asian Development Bank (ADB) official said
Saturday.
“We can expect massive capital inflows into
Asia once financial stability is restored,” Masahiro Kawai, the
bank’s head of regional economic integration, said at the ADB’s
annual meeting in the Spanish capital Madrid.
Global financial markets were still in the
middle of the credit crunch that emerged from the US subprime crisis
but confidence will be restored in six to 12 months, he said.
“And then where will they invest? Maybe not in
the US because we expect the US economy to continue to stagnate for
several quarters...it will be in Asia,” said Kawai, a special
advisor to the ADB’s president.
While the return of capital flows would help
Asian nations finance investment, Kawai warned that “this may not
be all good” as it also could erode competitiveness.
Before the start of the credit crunch, many
Asian nations saw their currencies rise as low interest rates in
countries such as Japan and Switzerland encouraged investors to
borrow cheaply there to invest in fast-growing developing economies.
Regional currencies such as the Thai baht,
Indonesian rupiah, Singaporean dollar, and Philippine peso have all
appreciated sharply against the dollar recently, making life tougher
for exporters in the region.
The issue dominated the ADB’s last annual
meeting held in Japan in May 2007, with the president of the
Manila-based lender, Haruhiko Kuroda, calling on Asian nations to
step up their financial cooperation to cope with the large capital
inflows.
-- AFP
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