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Politics : Clinton -- doomed & wagging, Japan collapses, Y2K bug, etc -- Ignore unavailable to you. Want to Upgrade?

To: SOROS who wrote (624)	10/11/1998 8:49:00 PM
From: SOROS	Respond to of 1151

worldbank.org World Economic Gloom: Only 2 Percent Growth IMF releases World Economic Outlook World economic growth this year will be only 2 percent, the International Monetary Fund says in its flagship report, the World Economic Outlook. This is a significantly gloomier assessment than in May when the Fund was predicting 3 percent growth for the year. "The chances of any significant improvement in 1999 have also diminished and the risks of a deeper, wider, and more prolonged downturn have escalated," said the report, which was released on September 30. Given the continuing problems in Asia, the turmoil in Russia and the spread of economic problems to Latin America, the gloomy assessment was not unexpected, and some academic economists warn that the Fund may be optimistic in predicting 2 percent growth. What is worrying is the large number of pressure points and the spread of the problems to stock markets, interest rates, currencies and to already weak commodity prices. Developing countries have been particularly badly hit. As the Fund noted: "A key problem is that financial markets tend, in the face of such a shock, to be characterized by panic and herd instinct" and thus do not discriminate between the potentially strong and the weak economies. The IMF had advice for most areas of the world: -It urged Japan to take "decisive action to resolve banking problems and ensure a self-sustaining recovery;" -While emerging Asian economies must address the weaknesses in policies and institutions and restructure their financial and corporate sectors that the crises had revealed to be deficient; -For Russia, the advice was even tougher-to "reëstablish montary discipline, achieve fiscal viability, restructure its banking system and restore relations with external creditors;" For the US and Europe, the Fund enjoined, "the time has come to consider a moderate easing of monetary policies to help counter the effects of the deteriorating environment on domestic activity and help restore calm in global financial markets. Michael Mussa, who presented the Outlook, rejected as "nonsense" the criticism that the Fund always recommended tightening. He pointed out that it was recommending easing of monetary policies for the US and Europe and advocated a "discretionary easing" in Japan and East Asia to stimulate recovery. The report concluded that the crisis had underscored "the urgent need to improve the functioning of the international financial system so that countries can safely access international capital markets and investors can diversify their portfolios with a better understanding of the risks involvedSum" For more on the World Economic Outlook, visit the IMF web site at www.imf.org/external/pubs/ft/weo/weo1098/index.htm