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To: Douglas V. Fant who wrote (18954)	4/14/1998 4:24:00 AM
From: Czechsinthemail	Read Replies (1) \| Respond to of 95453

Asian Fallout 'Will Reduce' Economic Growth By 25% The Financial Post The Asian crisis is set to reduce the rate of global economic expansion by a quarter in 1998, but the fallout will be "relatively mild" when compared with other major shocks of the past three decades, the International Monetary Fund says in its latest World Economic Outlook. The semi-annual report, made public yesterday, also discounted talk that deflation will prove a real threat, with booming domestic demand in most industrialized countries providing enough momentum to offset weaker commodity prices. Asia's financial crisis will slash global gross domestic product by one percentage point to 3.1%, the IMF said. The damage to major industrial economies "is expected to be modest" compared with the effects of the Arab oil embargo of 1974-75, the sovereign debt crisis of 1980-83 and oil market shocks in 1990-91 related to Iraq's invasion of Kuwait. While the estimated hit to global output is twice the size of the IMF's earlier forecast, released in December, the picture is starting to clear. "The financial turmoil in Asia that erupted in mid-1997 has abated since January and markets have partially recovered from their troughs," the IMF said. It echoed some of the comments made by U.S. Federal Reserve chairman Alan Greenspan when it forecast the slowdown in Asia would have a positive effect on major economies by throwing some cold water on red-hot growth. "On balance, the Asian crisis is likely to exert a moderate contractionary and disinflationary effect on the industrial ... economies, thus reducing the risk of overheating in those countries operating at high levels of resource utilization, in particular the United States." Some economists warn a recent slide in commodity prices is leading the way to widespread deflation, with prices falling in most sectors. However, the report said deflation "doesn't seem to be a major risk" and would be held at bay by strong consumer and industrial demand. The near-term outlook for commodity prices remains cloudy but there were signs prices were bottoming, it added. "On the basis of futures and forward market prices and other information, the projected level of non-fuel commodity prices for ... 1998 is about 3% above the current level." Since mid-1997, prices of primary commodities have fallen by more than 10%. The crisis brought higher import costs resulting from devalued national currencies, less credit to finance imports and sharp reductions in demand. World copper prices plunged 33% between June 1997 and January 1998, mostly because of falling demand in Asia. Timber prices were off 24%, nickel 20%, zinc 16%, hides 15% and soybean meal 11%.