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To: PaulM who wrote (24677)	12/21/1998 3:59:00 PM
From: goldsnow	Respond to of 116931

Business: The Economy IMF trims world growth forecast Stock markets in Asia are recovering - but only slowly Interest rate cuts in the United States and across Europe have done a lot to calm the world's financial markets, according to the World Economic Outlook published by the International Monetary Fund (IMF). However, the organisation warns that the markets are still fragile and predicts that global economic growth will be sluggish. The IMF is now cutting back its growth forecast for next year to a rate of 2.25%. Two months ago, IMF experts had predicted a growth rate of 2.5% in 1999. For the current year, though, the IMF has revised its forecast upwards, expecting global growth of around 2.25% - up from a 2% estimate in October. In 2000 the world's economy could be back on track, with economic activity forecast to expand by 3.5%. In its report entitled "Containing the risks to the world economy" the IMF warns that "while the danger of a global recession does seem to have diminished, the supply of funds to most emerging market economies is still sharply reduced, and conditions in financial markets remain fragile in several respects." There is particular concern that the US stock market could suddenly plummet again, threatening the world's economy. Asian recovery? During the past year, the IMF has steadily reduced its growth forecasts, as the crisis of the financial systems in Asia, Russia and other emerging economies has deepened. The IMF tried to contain the crisis and organised multi-billion dollar bailouts for those economies hardest hit - Indonesia, Thailand, South Korea, Russia and Brazil among them. But during the summer the turmoil began to spill over into the economies of many industrialised countries and as company profits were hit, share prices on Western stock markets came tumbling down. Share prices in London and New York may have recovered, but the short-term outlook for Asia is still dire. The IMF predicts that both South Korea and Indonesia will continue to see their economies shrink. Thailand, which was the first country to succumb to the crisis, is expected to be the first to emerge from it - with economic growth in 1999 forecast to be 1%. Indonesia's economy is expected to contract another 3.4%, following a slump of 15.3% this year. South Korea, which saw its economy shrink by 7% in 1998 is forecast to suffer further 'negative growth' of 1% next year. Russia in trouble While there are signs of a turnaround in Asia, the IMF's assessment of Russia's economic prospects is overwhelmingly negative. The IMF predicts that the country's output will shrink 8.3% in 1999, following a 5.7% contraction this year. "There is clearly a risk of an even larger decline, however, given the continuing fiscal imbalances, banking sector problems, and signs of reversals in the reform process," the according to the IMF report. Banks criticised The IMF has repeatedly been criticised that it has failed to contain the crisis in Asia. In its report the organisation tries to shift some of the blame, saying that "risk management systems" of banks and regulators had "not worked very well". The IMF accusses banks and investment funds of not having learned anything from the financial crisis in Mexico in 1994-95, while it blames government regulators for failing to understand the risks that are being taken in the financial sector news.bbc.co.uk

To: PaulM who wrote (24677)	12/21/1998 9:08:00 PM
From: goldsnow	Read Replies (6) \| Respond to of 116931

Full story Russian default on Soviet debt now seen inevitable 12:59 p.m. Dec 21, 1998 Eastern By Mike Dolan LONDON, Dec 21 (Reuters) - Russia on Monday acknowledged it was likely to default on its Soviet-era dollar debts, prompting bankers to warn this latest breach of its debt obligations would further fray relations with its foreign creditors. Already in protracted and unsuccessful talks with foreign banks over defaulted domestic rouble debt, Russia now looks to have failed to convince a legally sufficient number of holders of rescheduled Soviet-era debt to accept restructuring terms. Although government officials insisted they would continue to honour debt issued since the breakdown of the old Soviet Union in 1992 -- most of it in the form of Eurobonds -- analysts said it was hard to escape the fact that all Russian debt servicing was now at risk. ''As far as we can see there's no way out of default on this one,'' said one banker at a U.S. bank. Deutsche Bank (DBKG.F), which chairs Russia's London Club declined to comment on Monday. Russia reached agreement last year with the London Club -- a loose alliance of commercial bank creditors -- on rescheduling some $32.3 billion of the Soviet-era debt, which was restructured into new instruments known as principal notes (PRINs) and interest arrears notes (IANs). Holders of these securities now comprise thousands of investors including banks, bond funds and private retail investors. Achieving agreement between such a diverse group of creditors has become something of a nightmare. Deputy Finance Minister Mikhail Kasyanov told a news conference on Monday that only 72 percent of PRINs holders had accepted Russia's plan to restructure interest payments payable on the paper on December 2, compared with the 95 percent needed. Under the terms of last year's London Club deal, Russia has to secure the agreement of at least 95 percent of creditors to alter the payments structure in such a way. Russia asked the London Club last momth to poll some 800 holders of PRINs on whether they would accept new IANs to cover a $360 million cash payment. The deadline for such an agreement is December 29. Without agreement, Russia is legally in default. If the 95 percent vote is not accumulated by December 29, Bank of America, the restructuring agent on the deal, may declare Vneshekonombank (VEB), responsible for the London Club debts, in default, he said. ''We must consider it (default) from a realistic point of view,'' Kasyanov said. ''Instead of having an instrument which costs at least a bit on the market, they (the banks) will get nothing.'' ''There is a mechanism where acceptance of technical default then requires a smaller percentage of creditors to agree to get back around the table and start the whole process again,'' said another analyst at a U.S. bank. ''Everything would then be up for grabs again.'' Traders said one concern now is that Russia defaults on the IANs, a security that is much more widely held because it was allowed to trade via electronic settlements system Euroclear. Although both securities have traded at less than 10 cents in the dollar since the Russia financial crisis exploded in August, IANs have traded at a premium to PRINs because they were deemed to be senior debt in the event of payments difficulties. But bankers are now concerned that with Russia unable to service the PRIN payments by issuing more IANs, the government's incentive to service the IANs will wane. ''This is yet another extremely negative development for the market to stomach in Russia,'' said Peter Botoucharov, emerging markets economist at BankBoston. ''Everybody will be worse off.'' ((London Emerging Markets +44 171 542 6762, fax: +44 171 583 7239, mike.dolan+reuters.com)) Copyright 1998 Reuters Limited.