"Output levels in Asia, seasonally adjusted, show that after the very massive contraction around the turn of the year, for a large number of countries we have reached the bottom, which importantly includes Japan," said Bernhard Eschweiler, chief Asian economist for JP Morgan in Singapore.

This bottoming-out scenario for the real economies of Asia is a key factor behind recent stock market rallies around the region, with some markets pricing in a revival as early as the end of the first quarter next year.

But analysts warn a recovery can be a long way from a bottom.

"We are seeing stabilisation in a number of key areas and this is a prelude to a recovery, but I think the first quarter of (1999) is bit too optimistic," said Neil Saker, senior economist at SG Securities.

"I would say this time next year we will be seeingpositive growth in virtually all of the countries of Asia -- even in Indonesia," Saker said.

Analysts see several key reasons for the recovery: Monetary and fiscal policies are being eased, institutional supports are now in place for bank recapitalisation and bank balance sheets are being tidied up, and the international outlook for demand for such goods as electronics is picking up.

Some analysts see the IMF-assisted countries of Thailand, South Korea and Indonesia on target for an early recovery.

More developed economies like Singapore, Taiwan and Hong Kong may have longer to go before they recover.

"You can divide Asia into two main groups -- those that had the original crisis, usually a banking crisis, which forced through the balance of payments crisis and huge currency adjustments.

"Those are the countries where we see export volumes rising. Places like Thailand, Korea and even Indonesia see rapid (export) volume growth, which is the first leg to a recovery," JP Morgan's Eschweilersaid.

Countries that are lagging are mainly those that have so far been able to avoid the sharp crisis, according to Eschweiler.

Analysts now expect South Korea and Thailand to lead the recovery, while Hong Kong, Singapore and perhaps Taiwan will take longer. A number of uncertainties remain about Malaysia, Indonesia and the Philippines which make it harder to predict their pace of improvement.

South Korea's third-quarter gross domestic product estimate, issued on Wednesday, was down 6.8 per cent on a year earlier -- but economists said that suggested the economy had not deteriorated much between the second and third quarters this year.

Eschweiler said the two key laggards were Singapore and Hong Kong. "In Singapore, our sense is that we have got probably one or, at most, two more quarters to go. Hong Kong looks a lot closer to a bottom and I think here the key difference is the interest rate environment."

Simon Flint, head of research for Asia ex-Japan at consultancy group IDEA, said marketstrategists and stock watchers all got their interest rate forecasts wrong in Asia.

"No one was expecting current levels at all, so you've got a lot more liquidity around," Flint said.

He said some of this free liquidity might be finding its way into the stock markets as banks remained reluctant lenders.

"This shows that credit growth will take an awful long time to start. Although low interest rates will eventually help, you may not see relief for the next nine months," he said.