Singapore's leader Prime has warned the global economic slump may last several more years if the US doesn't fix its creaking banking system, a newspaper reported on Saturday.
Prime Minister Lee Hsien also called on President Barack Obama to resist pressure from the American public for protectionist policies such as trade barriers to protect homegrown industries during the downturn.
Lee, in Thailand for the 14th annual summit of Southeast Asian leaders, told the Bangkok Post in a pre-summit interview that the US the world's largest economy will be in recession for at least the rest of the year and could continue to stumble after that. "So you could easily be in for several years of quite slow growth worldwide. And I think it's best that we prepare for that, and prepare our people," said Lee, son of Lee Kuan Yew, the city-state's leader from 1959 to 1990.
Leaders and top officials from the Southeast Asian leaderss a region of more than 500 million people are gathered in the Thai resort town of Cha-Am, 120 miles (200 kilometers) south of the capital Bangkok, for the grouping's 14th summit. The meeting, usually dominated by human rights issues, is overshadowed this year by the global economic meltdown, which has already dragged the export-dependent region's most advanced economy Singapore into recession.
Thailand's economy shrank in the fourth quarter and others like Malaysia and Indonesia are facing rapidly slowing growth as exports crumble. Singapore warns that its economy will contract as much as 5 per cent this year.
The region which groups one of Asia's richest nations with some of its poorest is at the mercy of global economic winds, particularly from the US, a major export market for Southeast Asian countries.
US banks are loaded with hundreds of billions of dollars of toxic assets after the overheated American housing market imploded last year, sending shock waves through the global financial system. Lee said fixing ailing banks in the U.S. and some major European nations will require politically difficult and costly decisions such as nationalization, massive injections of capital, or governments buying the banks' bad assets. All involve nationalizing the banks "one way or another," he said.
"I think the choices are not easy but they have to be made. If you do not make a choice then the outcome will be like what happened in Japan in the 1990s and it went on for more than a decade because the problem just lingered," said Lee.
On protectionism, Lee said the openness of the US economy had for years driven the increase in global trade and rising prosperity, all of which was at stake if the US turned inward. "If America turns inward, it is going to do the world a lot of harm and do themselves a lot of harm," he said.