Unfortunately for East Asia and the world, rosy optimism is not yet appropriate. The Economist article was followed, ironically enough, by a completely unrelated story entitled "The lesson nobody learns." A quick survey of East Asia indicates that although a lucky few countries are limping toward a recovery, most are still deep in recession's throes, and a very unlucky few face severe political and social instability because of it.
Why would anyone say that the financial crisis is over? Several countries are enjoying positive signs. One of the best cases for the optimists is South Korea, where GDP growth (which had plunged to -7%) is forecast at 2% in the year 2000, and Seoul's stock markets have risen back to their January 1997 pre-crisis levels. The news that the Korean government will be repaying its IMF loans ahead of schedule has cheered investors, both domestic and foreign. The government has been working hard in other areas, as well, restructuring heavily indebted banks and other organizations, and enabling industrial production to rise dramatically. These circumstances, coupled with a new humility hard learned from the crisis, have had the effect of increasing foreign direct investment (FDI), bringing new cash and ideas to South Korea. The result is a virtuous cycle of increasing confidence.
But not all the signs are good. South Korea's labor unions are fighting hard against some of the restructuring, which will cost them jobs. Although unemployment is down 0.6% in the last month alone, it still stands at 8.1%, high by Korean standards. And Kim Dae Jung's coalition government, united by a sense of urgency over the economic crisis, is weakening -- the surest sign that complacency over the end of the crisis could lead to its exacerbation.
There is other good news from around East Asia. The Hang Seng, Hong Kong's prime stock market index, is at an all-time high. In Singapore, stocks are up 27.4% (in dollar terms, even more in local currency) in the first four months of 1999 alone. Malaysia and Thailand have increased their budget deficits up to 6% of GDP in order to give a Keynsian kick to their economies. Malaysia's bad loan-reform programs have largely been alleviating the harshest pains, and Thailand's has had some mixed success (although not as much), leading to a fairly dramatic increase in FDI.
