Terrorist attacks hurt fragile world economy
Advertiser News Services
The economic effects of the Sept. 11 terrorist attacks have begun to be felt around the globe.
The International Monetary Fund last week dropped its forecasts for growth, predicting the world economy will grow by 2.6 percent this year, its slowest expansion in eight years, stalled by the slowdown in the U.S. and Europe and a likely recession in Japan.
The Sept. 11 attacks will "further exacerbate" the risks of an even more severe slump, said the IMF, which in April predicted 3.2 percent world growth.
"A significant danger of a deeper and more prolonged slowdown remains," the fund said in its annual World Economic Outlook. The attacks may lead to a "substantial deterioration in consumer, corporate and financial confidence."
Still, the IMF said its numerical forecasts weren't adjusted for the attacks, suggesting the real figure for this year would be below the 2.5 percent level the fund considers tantamount to a worldwide recession. That hasn't happened since 1993, when the world economy grew by 2.2 percent.
Among the highlights of the report:
U.S.
Concern about the attacks sent U.S. consumer confidence to a 5 1/2-year low as airlines alone cut nearly 100,000 jobs. The IMF expects the U.S. economy to grow 1.3 percent this year, down from 4.1 percent in 2000. Next year, the U.S. should grow 2.2 percent.
Japan
Japan, the world's second-largest economy, has probably slipped into its fourth recession in the past decade and will see its economy shrink by 0.5 percent this year and grow by only 0.2 percent in 2002, the fund said. The fund said it supported the Bank of Japan's decision to lower interest rates to close to zero in March and the bank's more recent decisions to boost the supply of money.
Asia
Japan's "somber" outlook and the U.S. slowdown have hurt those countries in Southeast Asia, such as Malaysia, Thailand, South Korea, Singapore and Taiwan, that depend on technology exports.
Growth in Hong Kong, South Korea, Singapore and Taiwan will average 1 percent this year, the IMF said, cutting the 3.8 percent forecast it made in April. It trimmed its 2002 forecast for those countries to 4.3 percent from 5.5 percent.
The IMF forecast that the economies of Indonesia, Malaysia, the Philippines and Thailand will grow an average 2.4 percent this year, less than the 3.4 percent it projected earlier. It lowered its 2002 growth forecast for those countries to 4.1 percent from 5.5 percent.
China's economy will fare better than others in Asia, growing 7.4 percent this year and next year, the IMF said. That's partly because technology goods make up a smaller share of gross domestic product than in most Asian countries, it said.
Europe
The quickest turn for the worst came in Europe. In April the fund said its economic growth was "well sustained."
Since then the global watchdog cut the growth prospects for the countries that use the euro by a quarter, to 1.8 percent this year, saying the trade bloc will be dragged down by the uncertainty in the United States and the "stagnant overall activity" in Germany, Europe's largest economy.
The euro-zone countries will grow by 2.2 percent in 2002, as Germany rebounds from 0.8 percent growth this year to 1.8 percent. Growth estimates for the entire region next year also were trimmed to 2.2 percent from 2.8 percent.
Latin America
Latin America's economies will slow sharply this year and next, the fund said.
Growth in Latin America should fall to 1.7 percent this year from 4.2 percent in 2000 as economies from Mexico to Chile feel the brunt of a U.S. slowdown and investor pullout.
The region should grow 3.6 percent in 2001, recovering with the rest of the world, the IMF said.
Latin America was in a slump before the attacks as the U.S. economy slowed, with output sliding in Mexico, currencies plummeting in Brazil and Chile, and Argentina in a lengthy recession and close to bankruptcy.
Argentina, the region's third largest economy, is expected to have the worst performing economy, contracting 1.4 percent in 2001.
