Bankers group working towards 'early-warning smoke alarm' to pre-empt further crises in Asia

World bankers gathered in Hong Kong yesterday and forecast a clouded outlook for economic growth and investment flows into Asia this year - but with the promise of a gradual increase in capital inflows in 2002.

The forecasts were unveiled by Sir John Bond, chairman of the Institute of International Finance (IIF), at a press conference held to release a report on capital flows to emerging market economies.

Sir John, chairman of HSBC Holdings, parent of Hong Kong's biggest bank, HSBC Corp, also revealed the IIF was working in close collaboration with banking regulators to put in place 'an early-warning smoke alarm' to pre-empt further financial crises.

Research for the global association of international banks forecast a decline in aggregate growth in emerging market economies to 3.5 per cent this year from 5.7 per cent last year, and a decline in real gross domestic product growth in Asia to 5.4 per cent from 7.3 per cent last year.

Driving those shrinking growth rates, it said, was a combination of factors including the slowdown in the United States economy, the resulting slowdown in demand for information technology in particular, the weakness of the Japanese yen and the stagnation of the Japanese economy. Also contributing to the slowdown, it said, was 'limited progress in bank and corporate restructuring' in the region.

A notable exception to this criticism was China, and Sir John was at pains to isolate the mainland from the generally negative report on the region.