The remnants of the last financial crisis are still arrayed across this sprawling city: half-finished buildings covered with mold and rust stains, reminders of a real estate bubble a decade ago that burst with a loud bang.
The crisis of 1997 was breathtaking for its suddenness and ferocity. Banks collapsed, companies went under and erstwhile millionaires, desperate for cash, sold their belongings at what became known as the market of the formerly rich.
Now, as another global crisis unfolds, the signs of distress in Southeast Asia are more subtle.
Traffic has thinned by 6 percent on Bangkok’s expressways. Indonesian farmers who harvest the red fruit from oil palm trees are having trouble finding buyers. House prices in Vietnam, a relative newcomer to capitalism, have come down 30 percent in recent months, following years of steep rises.
Stock markets in Southeast Asia have slid downward almost in lockstep with those in New York, London and Tokyo. But outside of trading rooms, there is none of the palpable panic of a decade ago when the region was ground zero in what the Thais called the “tom yam kung crisis,” after the famous spicy soup that can burn one’s tongue.
“Last time it was self-inflicted; the crisis originated from within Asia,” said Mark Tan, an economist at Goldman Sachs in Hong Kong.
This time the contagion is radiating out from the US and Europe, the region’s biggest customers.
“While the initial reduction in growth won’t be as bad as in the Asian crisis,” Tan said, “it will also mean the rebound is slower and takes longer, as export demand will be much weaker.”
Lacking the immediacy of the last crisis, the twists and turns of the financial turmoil in the West have been received here like news of a plague valleys away. The villagers are wondering when it will hit their homes and how hard.
The reckoning is likely to come next year. As orders for exports drop off, factories will slow down and the main motor of Southeast Asian economies will sputter, say economists and government planners.
Southeast Asian countries exported themselves out of the last crisis with cheap products made even cheaper by their devalued currencies. The US, which was still enjoying its technology boom in 1999, snapped up the electronics, clothing and toys that the region produces.
This time, debt-laden consumers in the US do not appear to have the means to keep factories here humming. On the contrary, a newfound frugality among Americans is likely to drag Southeast Asia down. Thailand and Vietnam depend heavily on exports to power economic growth. For Malaysia and Singapore, overseas markets are even more crucial to domestic prosperity.
“We have had export-led growth for more than 30 years,” said Pansak Vinyaratn, a former chief economic adviser to the Thai government. “We have not geared ourselves toward investment in domestic-led growth.”
Workers may be laid off or migrant workers sent home, but economists are predicting a slowdown, not a recession. In 1997 the suddenness of the crisis put a bankrupted real estate developer out on the street selling sandwiches. Thailand’s economy shrank by a stunning 10 percent in 1998.
This crisis, when measured by economic growth, is predicted to be far less severe.
Governments, which now have larger cash reserves and relatively small deficits compared with the roaring and profligate 1990s, have already announced plans to increase spending to keep the economies moving.
Indonesia, which went cup in hand to the IMF last time, has much more room to maneuver. The country’s public debt has come down significantly, from more than 100 percent of the size of its economy eight years ago to about 36 percent now.
And in its earliest stages the credit crisis has brought a measure of relief to Southeast Asia.
The plunge in oil prices is good news for Indonesia, where subsidies make up a large part of the government budget.
The poor may also benefit. Along with fuel, the price of rice has fallen sharply.
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