(AFP) Southeast Asian finance ministers wound up a two-day meeting in Kuala Lumpur, expressing concern at the yen's decline and a "significantly more adverse" world economic outlook.

Asean's growth is expected to fall to an average of between three and five percent this year compared to 5.3 percent in 2000, they said in a joint statement.

The yen's fall "has created uncertainty and instability in regional financial markets and could adversely affect the prospects for continued growth of the Asean (Association of Southeast Asian Nations) economies," the ministers said.

They hailed a strong economic performance last year amid robust US and European demand for electronics and other exports.

Global outlook adverse

The 10 Asean members made "substantial progress" in financial and corporate restructuring, with most countries significantly cutting non-performing loans.

"This year, the global outlook has become significantly more adverse," the statement said, noting sharp falls in US share prices and expected moderating growth in the Euro Zone.

"The outlook for the Japanese economy remains fragile, given the structural problems within the financial sector."

The ministers said Asean's export growth moderated since late last year and foreign direct investment was expected to stay subdued in the near term.

Most economies were taking pre-emptive measures against a slowdown such as "expansionary fiscal and accommodative monetary policies". For some countries privatisation would reduce state fiscal burdens and improve efficiency.

Ministers pledged to persevere with financial and corporate sector reforms as "our top priority". To reduce dependence on bank borrowing officials were working to create a "vibrant capital market".

The 2001 growth prediction is less bullish than a forecast in a draft statement prepared before the meeting. The draft tipped average growth of 4.5 to 5.0 percent.

No reference to common currency

The final statement also omits a reference in the draft to long-term moves towards "the establishment of a single common currency or exchange rate system in Asean".

Plans to expand an existing network of currency swaps to guard against financial crises figured prominently at the meeting.

Ministers debated the "Chiang Mai" initiative - named after the Thai city where it was formulated last May - to link the international reserves of the 10 Asean countries with those of economic heavyweights China, South Korea and Japan through bilateral swap deals.

The issue of whether the International Monetary Fund (IMF) should get involved in monitoring swaps - as the Northeast Asian nations want - has dogged implementation of the initiative.

The ministers' statement reiterated a press release issued yesterday.

This noted the enlargement of the Asean swap arrangement to include all 10 countries, and an increase in its size to US$1 billion.