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

To: SOROS who wrote (832)	12/7/1998 9:55:00 PM
From: SOROS	Respond to of 1151

Wall Street Journal By MICHAEL M. PHILLIPS WASHINGTON -- The sense of economic doom may be receding in the U.S., but the World Bank warned that global recession could be just around the corner. "There is still a substantial risk that the world economy will plunge into recession in 1999," the bank said Wednesday in its annual Global Economic Prospects report. The bank provided two scenarios, and said the more likely is "sluggish growth" -- around 1.9% -- in the world economy, rather than a full-blown recession, defined as growth in global output of less than 1%. Under the more optimistic scenario, output will grow 2.7% in 2000 and a brisk 3.2% annually from 2001 to 2007. The bank, which praised recent interest-rate cuts in the industrialized countries and economic reforms announced in Japan and Brazil, is "cautiously optimistic that a recession can be averted," said economist Mick Riordan, one of the report's authors. The more upbeat prediction, however, depends on a certain amount of continued good news. The bank said the recession scenario will come into play if Japan's recession worsens, investor anxiety about emerging markets intensifies, private capital flows to the developing world dry up, and a large, sustained stock-market correction -- 20% to 30% -- depresses growth in the U.S. and Europe. "We can't tell for sure how long this crisis will last, or how deep it will be," the bank's chief economist, Joseph E. Stiglitz, said. Already, Brazil, Indonesia, Russia and 33 other countries in the developing world or former Soviet bloc are likely to see a drop in per-capita output this year. Among all developing nations, per-capita output will grow a mere 0.4% this year before resuming its usual pace of 3.5% after the turn of the millennium, the bank predicted. More than overall economic growth rates, per-capita rates reveal the depth of the hardship caused by the global financial crisis because they suggest how much more the average individual produces, and therefore takes home, each year. Mr. Stiglitz said a major source of the crisis was the sudden exodus of foreign investment from the Asian economies, a panicky capital flight that then spread to other developing countries. Controls on such capital movements are among the most contentious issues in the debate over how to prevent further financial crises. While the bank stopped well short of advocating limits on investors' ability to withdraw their money from a foreign country, the report endorsed the use of taxes or other tools that discourage the inflow of short-term capital. Chile, which amid the global turmoil has experienced relative stability in foreign-capital flows, essentially imposes taxes on short-term inflows, while allowing freer access for long-term investors. "We have to take actions to mitigate that type of excess risk-taking," Mr. Stiglitz said of the short-term emerging-market investments. The World Bank The World Bank Web site (www.worldbank.org) has the following resources available for the report, "Global Economic Prospects for Developing Countries 1998/99: Beyond Financial Crisis":