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To: Bobby Yellin who wrote (19202)	9/17/1998 7:49:00 PM
From: goldsnow	Read Replies (2) \| Respond to of 116762

IMF Cuts Global Growth Estimate Amid Asian Slump, Latin American Slide Washington, Sept. 17 (Bloomberg) -- The International Monetary Fund said it has slashed its estimate for world economic growth this year by a third because of the slump in Asia and Russia and a slide in Latin American markets. The international lender expects the global economy to expand just 2 percent this year, compared with the 3.1 percent growth it forecast last May, the Fund's managing director, Michel Camdessus, said in an interview with The Financial Times. The IMF is scheduled to unveil its forecast on Sept. 30 at its annual meeting in Washington. Camdessus couldn't be reached for comment, though an IMF spokesman confirmed the remarks attributed to him by the newspaper are accurate. Analysts said the Fund's projection was realistic. ''We don't think they are widely out of line with 2 percent,'' said Russ Sheldon, chief economist at MCM MoneyWatch in New York. ''The risk is that there will be a period later this year and perhaps the first half of next year where growth is on the ropes.'' The cut in growth estimates comes as the IMF readies itself to lend money to Latin American nations like Brazil, which has ratcheted up interest rates to stem an outflow of cash that for several weeks exceeded an average $1 billion a day until this week. Yet it's not just Asian and Latin America economies that are on the skids. U.S. Federal Reserve Chairman Alan Greenspan warned yesterday he's seeing ''the first signs of erosion around the edges'' of the U.S. economy. Ten days earlier, Greenspan questioned how long the U.S. could remain unaffected by the gathering turmoil in emerging markets. Brazil's finance minister, Pedro Malan, said two days ago the IMF and leading industrial nations may make at least $26 billion of credit available to Latin America. In response, Camdessus said Brazil didn't need the money and hadn't asked for any assistance. Wiggle Room The IMF also said its member governments are considering a plan to give the Fund power to freeze settlements on fixed-income debt for as much as three months, allowing borrowers time to negotiate with creditors without fear of litigation. The IMF's board also ratified a 1988 proposal to allow the Fund to lend to nations that are in arrears in debt payments. The proposed changes are aimed at giving the Fund more flexibility in its lending and the conditions it imposes on aid. The Fund is under fire from economists and governments that argue that the IMF's blueprint program -- tight credit and reductions in state spending -- have, at best, failed to solve the economic crisis in Asia and, at worst, fueled the turmoil by pushing economies into recession. The deepening of Asia's financial crisis is forcing some radical policy changes by governments, some of which are spurning the open market/high interest rate medicine usually advocated by the IMF. Malaysia has imposed currency controls and reduced rates, while Hong Kong -- regarded as the free-market stronghold of Asia -- spent an estimated $12.5 billion to prop up its stock market last month. Allowing the IMF to lend to countries in arrears would make it easier for the Fund to resume lending to Russia, which defaulted on ruble debt and on 751.5 million deutsche marks ($447 million) in interest payments due to Germany last month. The IMF was to have considered a $4.3 billion to Russia on Tuesday, though the fund didn't release the money. Officials at the lender and the U.S. Treasury have criticized Russia's default and have linked future payments on a $22.6 billion loan program -- cobbled together just two months ago -- to progress on reforms pledged in return for the loan agreement. bloomberg.com