Asian crisis affects world growth

Asian crisis affects world growth

LONDON (AFP): The financial turmoil in East Asia will shave
0.5 percent from world economic growth in 1998, with continental
Europe the most exposed region after Asia, U.S. investment bank
Lehman Brothers forecast Friday.

The global economy will expand by 2.5 percent next year,
according to the bank.

"Apart from Asia itself, the most exposed region is
continental Europe, whose recovery is not yet fully established,"
the bank's global chief economist, John Llewellyn, said.

Any slowdown in growth would be unhelpful for Europe, which is
grappling with record unemployment as it gears up for the launch
of the common European currency in January 1999.

The bank predicts that growth in Europe in 1998 will be cut by
0.25-0.5 percentage points to 2.25-2.5 percent.

U.S. growth looks stronger in the future than Lehman Brothers
anticipated at the start of the Asian crisis in July, but the
upward revision it would have made is largely canceled out by the
effects of the turmoil.

The United States is now expected to post growth of 2.5
percent in 1998. The U.S. economy grew by 3.3 percent in the
third quarter of this year.

Lehman Brothers said growth in Japan, whose moribund economy
is under pressure from domestic banking troubles and the weakness
of major Japanese export markets in Southeast Asia, will more
than halve to one percent, from 2. 5 percent previously forecast.

In Asia, excluding Japan and Australia, growth will be cut by
four percentage points to 3.5 percent, the bank forecast.

The financial crisis in East Asia will have the effect of
smothering domestic demand in those countries, and so hit exports
to the region from Japan, Europe and the United States.

In addition, the sharp currency devaluations in the region
will boost the international competitiveness of goods produced
there, to the disadvantage of major Western industrial economies.