Asian Crisis: Where It Stands Now
BOSTON — A New York University economist, Nouriel Roubini, has put together an "Asia Crisis Homepage" on the World Wide Web posting hundreds of scholarly and journalistic articles on the crisis. (www.stern.nyu.edu/~nroubini/)
It would take many hours to read them all.
For those with only a few minutes, here is a look at some key issues on this topic:
How badly will the crisis hurt the United States economy?
The severity of the crisis has been considerably worse than most analysts reckoned last autumn - and its impact in the US is being felt especially now. But most economists don't expect a recession.
The latest calculation, released last week by the Institute of International Finance (IIF) in Washington, finds that seven East Asian economies should see their trade balance with the rest of the world improve by some $150 billion in a year or so.
The US will take about one quarter of that blow, as will Japan, the European Union, and other emerging nations.
The cost to the US in lost exports and increased imports is trimming about 0.7 percent after inflation from its total output of goods and services, figure IIF economists Alan Zhang and William Cline.
A consensus of 55 economists, compiled by The Wall Street Journal, predicts US growth in the second half of 1998 will run at a modest annual rate of 2.29 percent.
Asia's drag should give Federal Reserve policymakers a reason to delay any hike in interest rates, notes Mr. Cline. (IIF members include the world's largest private banks and other financial institutions.)
The European Union will lose 0.6 percent of growth in its gross domestic product and nearby Japan about 1.4 percent.
What damage will the crisis do in Asia?
In 1996, real growth in the region was running a vigorous 5.7 to 8.6 percent.
This year, the economies of four nations will shrink: Indonesia by 12.5 percent, South Korea by 7 percent, Thailand by 5 percent, and Malaysia by 2 percent, forecast Cline and Mr. Zhang.
(For comparison, the US economy declined 2.1 percent in the sharp 1982 recession.)
Taiwan's economy will still grow 5.5 percent, Singapore 3.5 percent, and the Philippines 2 percent.
How long will the crisis last?
No one knows for sure. But at least into 1999.
Cline notes that some progress has been made in Thailand and Korea. The value of their currencies has picked up some. Their access to world capital markets has been curtailed, but they are not locked out from the foreign money that supported their rapid growth in the past.
Indonesia remains in the worst shape in the region, with political uncertainty adding to considerable economic chaos.
As of mid-June, Korea's currency had depreciated 38 percent from a year earlier; Thailand's 42 percent, Indonesia's 83 percent.
Has the Washington-based International Monetary Fund done a good job in handling the crisis?
Most economists give the 182-nation body an OK rating. But some economists have been highly critical.
For instance, Steven Radelet and Jeffrey Sachs of the Harvard Institute for International Development, Cambridge, Mass., liken the Asian troubles to a banking crisis. In such a panic, they hold, IMF-imposed austerity has been counterproductive.
Cline says IMF programs for Korea, Indonesia, and Thailand were not outdated, inappropriate austerity regimes. Rather, they were tailored to the need for "structural" change to revive the confidence of foreign investors.
Measures include strengthening banks and other financial institutions and moving toward greater "transparency" in corporations. The IMF wants to reduce "crony capitalism," with government officials closely tied to relatives and other allies in business.
As these economies sank further, the IMF has put less emphasis on tighter tax and government spending policies in revised programs. Government budgets had been in good shape.
Should Congress give the IMF an extra $18 billion?
The IMF rounded up $100 billion to rescue Thailand, Korea, and Indonesia. It has only $20 billion left. Cline says a "larger war chest" makes sense to deal with any future crisis.