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To: Uncle Frank who wrote (83387)	12/2/1998 6:42:00 PM
From: D.J.Smyth	Respond to of 176387

Have you ever known World Bank analysts to report positive news?: 16:58 DJS World Bank Says Asian Tigers' Heyday Over, Global Recession Possi 16:58 DJS World Bank Says Asian Tigers' Heyday Over, Global Recession Possible By Damian Milberton, Staff Reporter WASHINGTON -(Dow Jones) - The World Bank on Wednesday sounded the death knell for the era of the Asian Tigers, saying in a new report that these developing countries are unlikely to again display the phenomenal growth that marked their emergence nearly a decade ago. Even more worrisome, the institution warned that should attempts to reflate the Japanese, Brazilian and Russian economies prove fruitless, there is still a real chance of global recession in the months ahead. The World Bank issued these observations in its annual economic roundup, focusing on the world's developing economies and the crisis that has enveloped them since the second half of 1997. It estimates that as many as 25 million people will be forced into poverty in Indonesia and Thailand alone this year. Bank restructuring and refinancing in some of the hardest-hit countries could absorb a staggering 20% to 30% of their individual gross domestic products, money that might instead have been directed toward social programs. Accordingly, the report said, the world is unlikely to witness a revival among the so-called Tiger economies of East Asia to rival the heady growth rates seen earlier this 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 moderately strong growth, with more reliance on productivity gains and less on high investment," the World Bank said. At their most optimistic, the report's authors believe world economic growth will be sliced to 1.8% this year from 3.2% in 1997, while showing only a modest recovery to 1.9% in 1999. But they also included a worst-case scenario that shows a global economy displaying no growth in 1999, weighed down by contracting production in Japan and the U.S., offset by only modest expansion in the European Union. "Tempered but still strong growth in continental Europe and a slowing U.S. economy with room for managing a soft landing are positive elements" of prevailing economic conditions, the World Bank said. "More uncertain, but supported by recent developments, East Asian crisis countries and Japan are expected to shift from sharp recession in 1998 to stabilization in 1999, exerting less of a drag on world output growth," the report said. But even taking the "base case" scenario, growth among developing economies is expected to have more than halved to 2% in 1998 from 4.8% in 1997, the worst slowdown in 30 years for these nations. "There is still a substantial risk that the world economy will plunge into recession in 1999 rather than experiencing the sluggish growth described in the baseline outlook," the World Bank warns. The keys to avoiding such a calamity lie in reviving Japan's battered economy, restoring global investor confidence in capital markets and ensuring developing countries aren't starved of capital flows. Additionally, many governments face the tasks of recapitalizing their banking and financial systems while providing a social safety net for the millions being thrown into poverty and stimulating aggregate demand in the economy -- all without an associated resurgence in inflationary pressures. "Continuing financial support from the international community is vital," the World Bank added. However, the report isn't without its bright spots. The World Bank said world economic growth could accelerate to a rate of more than 3% annually if the EU is successful with a single currency, if Japan surmounts its banking calamities and if the U.S. is able to wring yet more productivity gains out of an already leaner economy. "In the longer-term -- despite the current gloom -- the world economy could still grow at slightly more than 3% a year if policies to prevent a deeper global slump are implemented quickly and developing countries strengthen their financial sectors and reforms," the report said. "The crisis in emerging markets will hit capital flows beyond the short-term but long-term growth in developing countries ... could still reach more than 5%, about the same as in 1991-97," the report said. Joseph Stiglitz, a World Bank vice president and its chief economist, told a media briefing that the chances of global recession have moderated in recent weeks with the formulation of the massive fiscal recovery plan in Japan and the economic reforms announced by Brazil that were a precursor to its receiving a $41.5 billion loan package from international institutions and donor countries. Copyright (c) 1998 Dow Jones & Company, Inc. All Rights Reserved. 12/02 4:58p CST