Global economy may improve marginally later this year: Morgan Stanley

By Park Bo-ram
SEOUL, Jan. 20 (Yonhap) -- The global economy may begin to show feeble
improvement later this year or early next year after the global credit crisis
plays itself out, a senior executive with the U.S. investment bank Morgan Stanley
said Tuesday.
"Recovery, when it comes late this year or in 2010, will be disappointingly weak,
and key features will be a multi-year slow-down," Stephen Roach, head of the New
York-based bank's Asian operations, told reporters.
Roach said the financial crisis is only about 50 percent over, noting that "as
the business cycle turns, the loan quality deterioration rate will lead to an
increase in non-performing loans, which causes further earnings impairment issues
for financial institutions."
The operation chairman in Asia also warned against the South Korean economy's
excessive reliance on exports for economic growth. Exports account for about 60
percent of the Korean economy.
"When you have an open economy to the extent of the Korean economy, there's a
limit to what you can do to overcome external shocks," said Roach.
He also credited South Korea with seeking a demand-led recovery in the aftermath
of the 1997-98 Asian financial crisis, recommending boosting consumption through
a combination of monetary and fiscal policy.
The South Korean economy grew 0.5 percent in the third quarter, the weakest in
four years, as exports faltered amid sluggish domestic demand. The country's
central bank predicted the economy will grow a mere 2 percent this year.
The government has unveiled tax cuts worth 35 trillion won (US$25.4 billion) and
16 trillion won of extra spending as part of an economic stimulus package.
Roach was promoted to chairman of Morgan Stanley Asia in 2007 after serving as
the investment bank's chief economist for 16 years.
pbr@yna.co.kr
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