"We are going for a recovery in 1999, but there is significant risk for it extending to the year 2000," said Clifford Tan, a director at SBC Warburg, Dillon and Read.

With the first anniversary of start of the crisis looming, Asian economies may have to drop interest rates by 100 to 200 basis points with their credit systems malfunctioning, no export-led recovery and unemployment soaring, Tan told a conference. "And as for Japan as an engine of growth for Asia, forget about that he said.

Tan said it would only be in 1999, the third year of the crisis which began with the collapse of the Thai baht last July, that Asia would start on the path of serious economic restructuring and recovery, pushed by a groundwell of domestic support.

"The lessons of history are clear; countries won't change unless they havea domestic consensus for change," he said after his speech.

"To tie everything together, I suspect that what will make countries change is disappointing growth, if you believe the argument that political legitmacy in these countries continues to hinge on growth."

Before that, Asian countries would see a period where the legitimacy of governments in power is questioned, Tan said.

"It means that even after (Indonesian former president) Suharto has left the scene, political legitimacy is a question that has just begun," he added. He said Asian central banks, especially in South Korea, Malaysia, Thailand and eventually Indonesia, will be forced into a renewed policy monetary easing. Interest rates in the region were expected to fall by 100 to 200 basis points in the year ahead, he said.

Tan forecast that the second year of the economic crisis would be one of corporate rescues, with Asian countries forced to preserve their corporate sectors by political and economic factors.

Tan said Asian central bankshad adopted a wrong policy model into trying to deal with the banking crises in their countries by bailing out weaker banks and would have to pay the price.

"For the first six, nine, 12 months (of the crisis), what we have observed is countries using the wrong policy model, the Japanese model, which has made the problem worse.

It has taken a very bad problem and made it catastrophic," he said.

He projected a further unfolding of a regional credit crunch as banks fought to preserve their balance sheets and said firms with good credit ratings might not be able not borrow. Tan said one sign of recovery would be a worsening of current account deficits as that would mean economic activity had increased.