But, according to the IMF's World Economic Outlook report released yesterday in Washington, growth would recover to 3.7 per cent in 1999, .
The report, a diagnosis of the economic health of IMF member states, painted a largely rosy panorama for all parts of the world with the exception of Asia. Among the major industrialised nations it is Japan's outlook that is by far the gloomiest.
"Risks are about evenly balanced around the world growth forecast," IMF chief economist Michael Mussa told a news conference yesterday. "We may have upside potential for North America and Continental Europe, but there is some downside risk in Asia and a number of other developing countries heavily dependant on commodity exports."
The IMF report said that Japan would be hit more strongly by Asia's economic turmoil than any other G-7 nation because of its high lending levels to the region and its tight trade links.
Mr Mussa said the IMF expected zero growth in Japan this year, but added that could be optimistic.
""Zero could be hard to achieve," he said. "It looks as if during the first half of this year we are looking at GDP heading down ... The fiscal stimulus offers some reasonable hope that in the second half there will be some resumption of positive growth."
Asia's woes had had a short-term beneficial effect, by contrast, on the US economy by preventing it from overheating after eight years of impressive growth. But the negative impact of the Asia crisis on American trade could hurt the dollar, prompting a possible adjustment of the booming stock market.
"In the United States the crisis and its repercussions appear for the time being to have obviated the need for a tightening of monetary policy to restrain the growth of demand," Mr Mussa said, but he added: "If the economy doesn't slow down by itself we may see the Fed having to firm monetary conditions some time later this year."
The IMF report said there was little risk of global deflation, conditions being significantly different from those experienced during the Great Depression of 1929. If the signs were that global growth was going to slow down further central banks would react by lowering interest rates.
"Fortunately growth in North America and western Europe has been well sustained and appears likely to remain so in th period ahead," the report said.Reuse content