History of the world economy

Gloomy forecasts for SE Asia - and West: Asian markets are likely to suffer badly from the crisis

From the BBC
21 December 1997

The International Monetary Fund says the financial crisis in Asia could deepen and spread in the months ahead and has warned that economic reforms by the countries most affected should not be put off.

The IMF says the slowdown in growth will mostly be felt in Japan but North America and Europe are now also likely to see their exports fall.

Michael Mussa: "a decidedly negative impact"As a result of the new predictions the IMF has slashed its 1998 global growth forecasts from 4.3 to 3.5%.

In South-East Asia itself, the centre of the the financial storm, the IMF predicts that the loss in output will be huge, with three quarters of the projected growth for next year lost and an expected increase in output forecast at under two per cent.

The head of the IMF's research department, Michael Mussa, says the predictions are bad news for the emerging markets.

"The growth slowdown we're going to see in South-east Asia is going to have a decidedly negative short-term impact," he says.

"Domestic demand is going to turn negative, 18 to 20% below trend. And that means consumption and investment are going to be very adversely affected."

The IMF admits that nothing is certain about its analysis, which reflectes a situation which has developed far more unfavourably than it expected only two months ago.

It says the outlook could be even worse than it now expects because investors may lose confidence in emerging markets.

That could mean a decline of $100bn (£60bn) in the flow of investment to those markets, an equivalent to two per cent of their total output.

The IMF says that the risks can be minimised if governments, above all those of east-Asian countries, act swiftly to put things right.

IMF growth projections

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