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SINGAPORE: The world is facing a protracted economic slowdown in the wake of the current financial crisis which is expected to last another two years, according to global economic expert Eisuke Sakakibara.
The former Japanese vice-minister of finance for international affairs said turbulence in the financial markets will track continued declines in home prices in the United States.
Dr Sakakibara, who is a professor at Waseda University, said: "What triggered the sub-prime crisis was the decline in the housing price and the housing price is now anticipated to continue to decline until some time in the summer of 2010... That's the basis of my prediction."
He added that Asian countries could pull together to develop a collective monetary fund to help troubled regional economies. But the region could benefit from a more aggressive monetary policy, which is likely to be implemented by US president-elect Barack Obama when he takes office next year.
However, the professor said the Obama administration should expect increasing "de-Americanisation" of Asian banks.
"By de-Americanisation, I'm implying that the investment bank-led financial regime seems to be ending, even in the US. Investment banks are disappearing, so we go back to more Asian or more traditional banking that we used to have ten or twenty years ago," Dr Sakakibara said.
He believes Asian economies are financially sound and will not face another financial crisis like the one in the late 1990s. He expects regional economies to emerge even stronger once the present crisis is over, compared to their Western counterparts.
- CNA/so
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