"All is Well!!!!!!!?"
U.S. recession unlikely, says IMF chief
January 11, 2001
Web posted at: 3:12 a.m. EST (0812 GMT)
Hong Kong (CNN) -- The chance of a recession in the United States this year is less than 50 percent, International Monetary Fund managing director Horst Kohler said in Hong Kong on Thursday.
The IMF view is in sharp contrast to the forecast earlier this week by U.S. investment bank Morgan Stanley Dean Witter that the United States is heading into recession, with contractions in the first two quarters of 2001.
In an exclusive interview with CNN's Andrew Stevens in Hong Kong Thursday, Kohler said that while there would be a substantial slowdown in the United States, there would be no recession. He called it a "normalization" that the IMF both expected and desired, and suggested it could give renewed impetus to Asia's slowing structural reform program.
Asked if the IMF believed the United States would face a recession, Kohler answered: "No. We expected and desired a slowdown in the U.S. because growth rates for this big economy of 4 (percent) to 5 percent and more is and was not sustainable.
"Now there is a concern that the slowdown could go too far, but from what we know, the probability of a recession is clearly below 50 percent."
Morgan Stanley earlier this week downgraded its U.S. growth prospects in 2001 to just 1.1 percent, significantly less than its early December forecast of 3 percent. It predicted a 1.25 percent annualized contraction in the first two quarters, with its global economist Stephen Roach terming the outlook one of a "mild recession" that carried the risk of proving longer and deeper than expected.
Kohler, who last week welcomed the U.S. interest rate reduction as a "timely adjustment" that would help ensure a soft landing in the United States and strengthen prospects for sustained global growth, said people should not panic. He told CNN that the U.S. slowdown clearly would have an impact on Asian economies, particularly those heavily dependent on exports of electronics and other goods to the United States.
'People should not panic'
"But people should not panic. It is a kind of normalization. I think the region as a whole, including China, is still a place of considerable trade and commerce, so that growth rates will come down, but not in the sense that there is a risk of a recession."
Kohler said he was not concerned that there would a repeat of the Asian financial crisis of 1997-98, pointing to a better macroeconomic situation, a buildup in foreign exchange reserves and sounder structures in the region.
"But of course I am not satisfied," he said, noting that Asia's strong recent recovery may have slowed the restructuring momentum and willingness of some countries to push ahead with reforms. He agreed that more could be done in Indonesia, Thailand and Korea.
"I am concerned that the high growth rates in the past may have diminished ambition to take action, but it's not too late. The slowing down in the global economy triggered by the slowdown in the U.S. economy may have been the right signal at the right time to build up new momentum," he said.
The first of a two-part interview with Kohler appears on CNN's BizAsia program by Andrew Stevens, which airs at 6:30 p.m. Thursday Hong Kong time (3:30 p.m. Sydney, 4:30 p.m. Tokyo, 12 midnight New Delhi). |
