The worst of the economic storm in Asia is probably over.
But flotsam stirred up by the crisis will wash ashore in the United States for some time, experts say.
Last week, for instance, Boeing announced that it would cut 20,000 jobs by 2000 because of low sales in Asia.
"The worst of the Asia hit is probably behind us in 1998," says Paul Atkinson, an economist with the Organization for Economic Cooperation and Development in Paris. South Korea and Thailand show signs of recovery. Politically troubled Indonesia remains in depression.
The World Bank, in a new report, also predicts that most Asian nations involved will probably begin climbing out of recessions next year. Growth will continue in 2000.
The bank adds, though: "There is still a substantial risk that the world economy will plunge into recession in 1999."
Global recession worries
One risk it sees is worsening recession in Japan. Another is that confidence-shaken investors might shut down flows of private money to developing countries, especially Latin America. Further, the bank cautions, a price drop in stocks of 20 to 30 percent could depress growth in the US and Europe.
Economist David Wyss puts the probability of US recession at only 20 percent next year. The Asian crisis is "not over yet," says the consultant with Standard & Poor's DRI, in Lexington, Mass. But its worst impact on the United States economy is probably past.
DRI's list of economic dangers is even longer than that of the World Bank.
Two or three large Japanese banks could fail, leading to a financial meltdown in Japan. The yen could fall dramatically in relation to the US dollar. China could devalue its currency. Russia could devalue the ruble again. The $41 billion rescue of Brazil's currency, the real, might not work. Or Europe and the US could fall into recession.
But these are all "coulds" and "mights."
For now, Mr. Wyss expects the US economy to grow about 2 percent in 1999. The OECD says 1.5 percent.
For some Americans, though, trouble still could lie ahead.
A November survey by the National Association of Purchasing Management finds that manufacturers in general are still suffering from the effects of the Asia crisis. Norbert Ore, director of purchasing for Chesapeake Corp., in Richmond, Va., notes that manufacturing has declined for the past six months after 22 months of growth.
Trade drags down growth
Wyss calculates that the drag on the American economy from the crisis abroad has taken about 1.3 percentage points off of domestic growth in goods and services this year from what it would have been otherwise. Growth will still be a husky 3.6 percent after inflation.
Next year, he says the drag on the US from lost exports and growing imports will run about 0.7 percentage points.
Wyss says the US trade deficit in merchandise will swell from $243 billion this year to $307 billion in 1999.
His big concern is that Japan, with the world's second-largest economy, will not emerge from recession.
Japan last month announced a $195 billion economic-stimulus package. It has taken some measures to deal with the insolvency of many of its banks.
Japan's sea of red ink
Standard & Poor's estimates that nonperforming loans - those not repaying interest or principal properly - add up to 30 percent of Japan's gross domestic product (GDP), that is, its total output of goods and services.
In the US, at the worst of the savings-and-loan crisis, nonperforming loans were about 3 percent of GDP.
"We are gloomy about Japan," Wyss says. "They have been spending the last years trying to sweep their problems under the rug, and their idea of reform is to buy a bigger rug."
Wyss is also suspicious of Japan's stock market, with its prices still 60 percent below where they were a decade ago. That stock-market slump has dragged out longer than the bear market in the US during the Depression.
Contrariwise, stock prices in the US have snapped back faster than ever before from a major price drop - 19 percent. The recovery has taken only five months since prices peaked July 17.
After the 1987 market crash, it took 23 months for prices to return to their August 1987 peak, notes Wyss.
Though not ruling out another "correction," he expects stocks to offer "sub par returns over the next few years" as economic reality catches up with investors' expectations. That means a 7 percent annual return, not the double-digit returns of the past few years.
That, notes Wyss, will still be better than the 5 percent offered by bonds.