But I would urge you instead to look at the reports of our annual medical check-ups conducted by the IMF since 1990 in the form of what are known as the Article IV Consultations. The IMF team was in fact in Hong Kong for this year’s Consultation in the second half of October, when the short-lived but somewhat intense attack on our currency occurred. It was the best time for any diagnosis of financial problems. But after observing us closely over the period the team again gave us a clean bill of health. Let me give you a few relevant quotes from the Concluding Statement of the Consultation, which has already been published.
This has perhaps surprised many, just as they have been surprised that the financial turmoil of the region could so suddenly erupt with such severity and contagion. 4. Indeed, not long ago, stories about the Asian miracle abounded. Asia had been the fastest growing region in the world and the economic numbers had been generally sound. Asian economies had low inflation rates and exchange rates had been stable, at least until recently. Current account for the region as a whole had been broadly in balance, although understandably the situation for individual economies varied. The fiscal account excluding Japan had been in surplus. Asia also had exceptionally high savings rates of over 30% of GDP and investment rates were equally high. Official sector savings of the Asian economies, in terms of their foreign currency reserves, were very substantial, accounting for about 40% of the world’s foreign exchange reserves. Now five of the top six foreign reserves holders in the world are in Asia. The work force in Asia was young, educated and flexible. The political situation was stable. Policies were outward-looking with a commitment to open markets and free trade. 5. So what went wrong in Asia? What turned the Asian miracle into what is now referred to, quite unkindly in my opinion, as the Asian myth or the Asian mirage? A few months into this fall out, there have been many explanations offered. The most talked about was the rapid growth and volatility of international capital flows. 6.