|
Economy
|
2000-05-29 20:54:00-04
|
'Hard Landing' for US Economy hangs over Asian Recovery
|
|
OECD recommends continued US interest rate hikes, cites danger to recovering Asian economies
|
As East Asia returns from financial crisis, the possibility of a 'hard landing' for the United States economy still poses a threat, according to the Organization for Economic Cooperation and Development in its report released today. The OECD is expecting US short-term interest rates to rise to 7.25% from the current 6.50% by August. The US economy is expected to grow 4.9% this year, up from an earlier forecast of 4.5% earlier this month. The OECD said, 'Despite a significant improvement in the underlying growth potential, demand is currently outstripping supply and generating inflationary pressures that are starting to show up in core inflation.' The implications for Asia in the unfolding US economic scenario are profound. The recovery of Asian economies has been led by dramatic improvements in exports, especially to the United States. Raising US interest rates will cut demand for these imported goods and this will slow the economic growth of Asian nations. Other than this threat, the OECD had positive comments about Asian economies, with the exception of Indonesia. The Chinese economy had picked up and growth should continue for two years. Thailand and Malaysia had moved ahead with overhauling their shaky financial industries, however, Indonesia was still struggling in this. Underlining this, today (Tuesday) two key economic officials in the Indonesian cabinet resigned. The OECD mentioned that crisis-recovering countries had accumulated substantial public debt due to their restructuring efforts 'that will require significant fiscal consolidation over the next several years.' The OECD concluded that a big slowdown in the US economy 'could significantly set back, although probably not abort, their recoveries.'
|
