British exports to Asia plummeted in 1998, taking the global deficit on traded goods to pounds 20.6bn, its highest level since 1989, Office for National Statistics data revealed.
The value of exports to crisis-ridden south-east Asia tumbled by 27 per cent last year, and preliminary figures for the first month of 1999 indicated that the worst could be yet to come.
The deficit on traded goods with countries outside the European Union rose to pounds 2.2bn in January, its highest level since the series started in 1988.
Government statisticians calculated that Britain's soaring trade deficit wiped 1.1 percentage points from fourth quarter economic growth. City economists warned that the trade deficit would continue to drag on growth during 1999.
Despite the sharp fall in exports, the ONS left its estimate of growth in fourth quarter gross domestic product (GDP) unchanged at 0.2 per cent, with continued strong growth in services helping to outweigh the negative trade effect.
However, ONS revisions to GDP data earlier in the year meant that the year-on-year growth rate was revised down from 1.6 per cent to 1.3 per cent, the lowest level for almost six years.
The latest data, taken together with yesterday's evidence to Parliament from Eddie George, the Governor of the Bank of England, left the door open for further interest rate cuts in the months ahead, analysts said.
Speaking to MPs on the Treasury Select Committee, Mr George - who will today make his first speech in the North-east since his controversial remarks about jobs losses in the region - indicated that his concerns about inflationary pressures in the labour market had abated.
Mr George said he found it "difficult to explain" the pound's recent strength against the euro. However, he denied that the euro - which hit new record lows against the dollar yesterday - was facing collapse.
The Governor also urged industrial countries to do more to boost growth in the troubled emerging markets.Reuse content