International Issues

Little U.S. Fall Out from Asia's Financial Turmoil

The turmoil in Southeast Asian currencies and markets quickly spread to stock exchanges around the world. Aside from equity market impacts, will the regions' woes disrupt economies throughout the world? And if so, which ones?

  • Economists think the direct impact on the U.S. economy -- which is strong and well-positioned to weather a storm -- will be slight, shaving perhaps a few tenths of a percentage point off U.S. growth rates in the months ahead.

  • U.S. exports to Thailand, the Philippines, Indonesia and Malaysia were only about four percent of last year's total exports.

  • Economists expect Southeast Asia's economic growth rates to slow to 4 percent or less from 8 percent or more.

  • The impact is expected to be most severely felt in Japan, whose economy is already in the dumps and banks there still mired in crisis.

What about the economies of Europe and Latin America?

  • In Western Europe, both France and Germany could be hurt by a reduction in exports to Asia.

  • Eastern European countries may be vulnerable to attacks on their currencies.

  • Interest rates may be forced higher and growth slowed in Latin American countries -- particularly Argentina and Brazil -- with the future of Argentina's privatization programs uncertain.

Economists predict that currency problems may put the brakes on foreign direct investment in developing countries. This has soared in recent years. Net foreign direct investment in developing Asian, Latin American and East European countries has ballooned from $48.8 billion in 1993 to more than $100 billion last year, according to the International Monetary Fund.

Source: Bernard Wysocki Jr., "Beyond the Markets, Asia's Woes Will Exact a Toll in Many Lands," Wall Street Journal, October 30, 1997.

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