> December 21, 1997 The Toronto Star
>
> IMF warns money crisis will spread
>
> Forecast shows global economic slowdown in
> 1998
>
> WASHINGTON (CP) - The financial firestorm
> raging through Asia will leave no country
> untouched in 1998. Around the world,
> economic growth will slow and unemployment
> will rise, especially in nations at the
> centre of the crisis.
>
> That's the view of the International
> Monetary Fund, which is releasing its most
> extensive assessment so far of the
> currency crisis that has forced the
> lending agency to assemble
> multibillion-dollar bailout packages for
> Thailand, Indonesia and South Korea.
>
> Because of the rapidly deteriorating
> situation, the IMF yesterday updated its
> World Economic Outlook, originally
> released in October, with new economic
> projections for 1998.
>
> The IMF now projects the global economy in
> 1998 will grow at its slowest pace in five
> years, an increase of just 3.5 per cent.
> The forecast represents a 0.8
> percentage-point reduction from two months
> ago, when the IMF had projected worldwide
> economic growth at 4.3 per cent.
>
> The IMF said there is no reason to be
> overly pessimistic and that ``the threat
> to global growth from the present crisis
> is reasonably limited.''
>
> Still, it warned the risk of the Asian
> trouble spreading to other countries had
> grown and that there was no way of knowing
> whether the world had yet seen the worst.
>
> ``The balance of risks is a little on the
> downside,'' IMF chief economist Michael
> Mussa said at a news conference to present
> the report.
>
> While noting that growth in North America
> and Europe looked ``well sustained in the
> period ahead,'' the IMF warned: ``A sharp
> slowdown in economic growth is an
> unavoidable consequence of the type of
> crisis affecting a number of the Asian
> economies.''
>
> Admitting that it originally had misjudged
> the extent of the turmoil, the IMF
> appealed to troubled Asian nations to take
> urgent measures to reform their fiscal
> systems, keep monetary policy tight and
> overhaul weak financial sectors.
>
> The lending agency warned that a further
> slowdown in the already sluggish Japanese
> economy posed the ``key risk'' to advanced
> economies elsewhere in the world.
>
> In the gloomiest section of its report,
> the IMF predicted the Japanese economy
> would grow by only 1.1 per cent in 1998
> compared with 1.0 per cent this year and
> only half what had been forecast in
> October.
>
> Europe, less dependent on Asian export
> markets, will see growth reduced just 0.1
> percentage point from October's estimate
> to 2.7 per cent.
>
> Economic growth for Canada now is forecast
> at 3.2 per cent compared with an estimated
> 3.7 per cent this year and off 0.3 of a
> percentage point from the October
> estimate.
>
> For the United States, the IMF forecast
> economic growth of 2.4 per cent next year,
> down from an expected 3.8 per cent.
>
