IMF: Global Economy Will Rebound
Tuesday, 20 April 1999
W A S H I N G T O N (AP)
THE GLOBAL economy, badly shaken by a 20-month-old currency
crisis that has pushed one-third of the world into recession, should
stabilize this year and enjoy a solid rebound by 2000, the
International Monetary Fund predicted Tuesday.
For the first time since the financial crisis hit in July 1997, the IMF
said it was able to revise its previous outlook upward a bit instead of
being forced to admit it had been too optimistic.
For 1999, the IMF's "World Economic Outlook" projected global
growth of 2.3 percent. While that would be lower than last year's 2.5
percent, it represented a slight 0.1 percent increase from the last
IMF forecast issued in December.
For 2000, the IMF was even more optimistic, predicting a solid
recovery, with world output increasing by 3.4 percent.
The IMF's 1999 outlook was bolstered by a sizable upward revision in
expectations for the United States. In December, the outlook
predicted U.S. growth would slow to 1.8 percent. But it now believes
the U.S. economy will grow 3.3 percent this year, slowing to 2.2
percent in 2000.
That was offset somewhat by worse-than-expected performance in
Japan and Latin America, which became the latest victim of the
global currency crisis in January when Brazil was forced to devalue its
currency.
But Michael Mussa, the IMF's chief economist, said the agency was
fairly confident that the currency crisis was bottoming out and the
foundation laid for a solid recovery next year.
For that recovery to be fully realized, the IMF said, the United
States must achieve a "soft landing" with growth slowing to a more
sustainable pace to keep inflation pressures at bay. Japan, the
second-largest economy, will have to finally exhibit signs of emerging
from its worst recession in a half-century, and Europe must find a way
to bolster growth, which in recent months has been slipping.
The 182-nation IMF released its new assessment of the global
economy in advance of the lending institution's spring meeting at
which time finance ministers are expected to resume efforts to put in
place a new global financial architecture to make the world less
vulnerable to Asian-style currency crises.
IMF forecasters saw little concern that the NATO bombing
campaign in Yugoslavia will trigger serious economic turmoil beyond
neighboring countries in the region.
Japan's economy was projected to shrink again this year, with output
falling 1.4 percent - double last year's plunge. The IMF said,
however, there are hopeful signs Japan is finally emerging from its
decade-long period of weakness. It predicted an end to the Japanese
recession and slight growth of 0.3 percent in 2000.
The IMF was even more optimistic about other Asian countries,
where plunging currencies and stock markets in 1997 marked the
start of the financial turmoil that spread to Russia and Latin America.
"Activity has recently turned around in Korea and seems to have
bottomed out in Malaysia and Thailand," the IMF said. "Investor
sentiment toward many emerging market economies has rallied."
This represented a much more positive view than just six months ago.
After Russia defaulted on billions of dollars in debt, financial markets
around the world were thrown into a tailspin.
The Federal Reserve responded with a series of U.S. interest rate
cuts that restored confidence and sent U.S. markets headed to new
highs. |
