Storm clouds are gathering over Asian economies. Although the region has recovered from the worst of the 1997 financial crisis, the slowdown in the United States will give Asia a jolt. The region can overcome those difficulties if Asian economies continue their corporate and financial reforms, but unfortunately, recovery has produced complacency. Reform has stalled, and bad habits are reasserting themselves. Asian businesses and governments must fight those impulses and stick to the reform agenda.

According to a report released earlier this week by the United Nations Economic and Social Commission for Asia and the Pacific, the 25 developing Asian nations surveyed grew 7.1 percent on average last year; developed countries in the region grew considerably more slowly, a mere 1.8 percent. Growth this year was forecast to reach 6 percent, but ESCAP has already lowered those estimates to reflect the impact of the slowdown in the U.S. Now, there is a general consensus of 4 percent to 4.5 percent growth in the 10 Asian economies, with hot ASEAN economies like those of Thailand, Malaysia, Singapore and Indonesia slated to grow only 3-4 percent.

The effects are already being felt. Taiwan's manufacturing output is expected to have fallen 5.75 percent in the first quarter of this year, the largest drop in 26 years. In Thailand, where exports account for nearly 60 percent of economic output, January saw the first monthly trade deficit in 30 months. Singapore's economy expanded 9.9 percent last year; original forecasts targeted 5-7 percent growth in 2001, but next week new figures will be released that economists expect will range from 4 to 6 percent.