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To: Edmund Lee who wrote (23724)	12/2/1998 6:39:00 PM
From: goldsnow	Read Replies (2) \| Respond to of 116759

World Bank Sees Risk of Recession Wednesday, 2 December 1998 (AP) WASHINGTON (AP ) - The world economy still faces a substantial risk that it could plunge into recession next year rather than experience sluggish growth, the World Bank said Wednesday. Events that could cause a slump, a new report said, include a worsening recession in Japan, a loss of investor confidence that could halt the flow of international capital to developing countries, especially in Latin America, and a 20- to 30-percent plunge in stock markets in wealthy nations. The lending institution made these observations in its annual economic roundup that focuses on the developing countries and their experiences with the economic crises that began in Asia 17 months ago and then spread to Russia and Latin America. In addition to forecasting growth rates for developing countries, the report also deals with why the crisis had such a damaging effect, even in countries with sound economies, and prevention of future shocks by the international community. With the frequency and cost of global crises rising, remedies need to be devised and applied swiftly, said Joseph Stiglitz, the bank's chief economist. "When there is an isolated accident on the road, one tends to blame the driver," Stiglitz said. "But when accidents occur repeatedly at the same bend in the curve one begins to suspect something is wrong in the road. "This report is devoted to understanding precisely what is wrong with the road and how we can make it safer, both for the countries and especially the poorest within them and how best to respond to the accidents that inevitably will occur." According to the report, growth in developing countries is expected to diminish to 2 percent in 1998 from 4.8 percent in 1997, the worst slowdown in 30 years for these nations. "Although 1999 is likely to be another year of slow growth in developing countries their situation could improve in 2000 and following years when their per capita growth could return to the 3.5 percent pace of recent years," the report said. The report said that in Indonesia, South Korea and Thailand, the three Asian countries hardest hit by the crisis, unemployment is expected to more than triple, while the number of people forced into poverty could reach 25 million in Indonesia and Thailand alone. These countries and some other economies in Asia are unlikely to witness a revival of the booming growth rates they recorded earlier in the decade. "Following their deep crisis, East Asian economies are unlikely to return to their extremely rapid growth rates of the early 1990s but recover to more moderately strong growth , with more reliance on productivity gains and less on high investment," the bank said. The report said world economic growth in 1998 is expected to be 1.8 percent this year, down from 3.8 percent in 1997 with only a modest recovery to 1.9 percent in 1999. But the report also includes a worst-case scenario that shows the global economy displaying no growth in 1999, with contraction in Japan and the United States offset only by a modest expansion in Europe.