Bank for International Settlements Annual Report: Crisis Management Is Key to Crisis Prevention
| Pages | 203-204 |
Page 203
In its sixty-eighth Annual Report, the Bank for International Settlements (BIS) advises Asian developing economies to adopt IMF reforms, noting that "prompt, and above all politically committed, responses to the prescriptions of the International Monetary Fund would do more to revive growth prospects than anything else in countries where such a commitment is lacking." The report, which covers the year ending March 31, was released on June 8 and includes an analysis of the effects of the Asian crisis on the global economy and offers measures for crisis prevention and management.
The report calls the "suddenness with which the crisis began, the relentless progress of contagion across countries, and the magnitude of the collapse in exchange rates and asset prices" unprecedented, noting that it is not clear that the worst is over. While financial markets have stabilized somewhat, the report suggests that the full impact on domestic companies and the institutions that have lent to them as well as the social costs "remains to be seen." On a more positive note, it concludes that the worst may be over in Asia itself, given that financial markets there have stabilized to some degree. Adopting IMF reforms in countries of the region would, the report states, "help restore confidence, allowing interest rates to decline and exchange rates to rise from excessively low levels."
Despite the traumatic events in Asia, the BIS report indicates that economic prospects for the rest of the world still look generally positive. The Asian crisis and its impact on world prices for oil, electronic products, and other commodities will reinforce disinflationary trends around the world, and financial markets worldwide have responded "extremely favorably" to them. In the United States and the United Kingdom, strong growth of domestic demand has pushed output to, and possibly beyond, levels previously thought to be incompatible with nonaccelerating inflation.
In continental Europe, the repercussions of the crisis maybe harder to identify, the report says, because a significant proportion of external European trade is with Asia and European export orders to Asia have not begun to falter. But European bank exposure to Asian banks is almost as great as that of Japanese banks, though this degree of expansion is somewhat mitigated by the overall health of the...
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