"Some Asian crisis countries, notably Korea, appear to have started to recover more rapidly than expected," the Organisation for Economic Co-operation and Development said in its global economic outlook.

The twice-yearly report said global economic conditions appeared more favourable than six months ago, with stock markets rising and risk premiums falling.

In South Korea, one of Asia's hardest hit economies, the country's worst post-war recession appeared to have bottomed out, aided by expansionary monetary and fiscal policies.

But much work remained to be done to rehabilitate sick financial and corporate sectors -- on which growth in 2000 and beyond would depend -- while South Korean exports faced a risk of fallout from fluctuations in other Asian currencies.

The report was optimistic about Australiaand New Zealand.

New Zealand had moved out of recession in 1998 and recent indicators were showing a broadening of its recovery, with economic growth forecast to exceed 2.5 to 3.0 percent.

Australia had outshone other OECD nations in the region, growing by five per cent in 1998, and its strong showing was expected to continue despite an anticipated slowdown in 1999.

The darkest cloud on Australia's horizon was a weaker-than-expected recovery in Asia. The report made clear that some regional economies, especially Japan, faced an uphill battle.

"In Japan, the outlook remains bleak," it said, adding that there was little room left for macroeconomic policies to boost activity with interest rates at almost zero and a large government debt burden built up by fiscal stimulus packages.

"Although the worst of the recession is thought to be over, no pickup to speak of is expected," the report said.

Output had fallen more than five per cent since the start of Japan's recession in 1997, unemployment was atrecord levels, private spending had shrunk and deflationary pressure was heavy.

"Assuming no more fiscal policy action, output is likely to do no more than stabilise," the report said. The dynamic Asian economies of Taiwan, Hong Kong, China, Indonesia, Malaysia, the Philippines, Singapore and Thailand were positioned for a mild rebound, but recovery was unlikely to become firmly established before 2000.

Supporting fiscal policy, falling inflation and a revival of imports were positive, but banks were still reluctant to lend.

Malaysia, the Philippines, Singapore and Taiwan would gain from expected recovery in world demand for electronics, but their broad competitive gains had run out, the report said.

"Recovery prospects are particularly uncertain in Thailand and Indonesia," it said, adding that financial and corporate restructuring in both countries had gone slower than expected.

China remained a key factor in Asia's economic outlook.

Although short-term pressure for devaluation was limited,prospects for foreign investment were uncertain due to concerns over China's financial institutions and general weakness in Asia.

"These concerns underscore the need for decisive progress during the next several years in alleviating the problems of the financial and enterprise sectors if risks to China's growth performance are to be contained," the report said.