The Asian countries worst-hit by the regional currency tur moil could see their growth rates fall as much as 15 per cent over the next few years due to falling foreign investment, a regional analyst says.
BZW Asia regional head of economics and strategy Pauline Gately said higher foreign exchange risk would make it harder for Asian borrowers to raise money abroad and would deter foreigners from investing, with both leading to slower economic growth.
'Over the last few years, Asian corporates have been able to raise US dollar denominated debt and not worry about the foreign exchange risk. That has changed,' Ms Gately said at the World Economic Congress yesterday.
'We are in a brave new world in Asia now.' Ms Gately said the sudden depreciation of a number of the region's currencies - principally in Thailand, Malaysia, the Philippines and Indonesia - meant investment in the region was likely to be curtailed for the next two years.
Slackening investment would take its toll on economic growth, especially because these four countries had all grown increasingly dependent on foreign fund inflows to drive growth.
In Malaysia, foreign investment accounted for 47 per cent of gross domestic product in 1996, up from 33 per cent in 1992.
Thailand, Indonesia, and the Philippines had also grown more reliant on outside investment.
