NCPA - National Center for Policy Analysis

Is The Global Economic Crisis Over?

April 14, 1999

Twenty months after it began, chaos in the world's financial systems seems to be abating and stability returning. Panics in Asia and Latin America have not spread to the U.S. and Europe, as once feared, and there are signs those once-tottering economies are pulling back from the brink.

  • Stock markets in Brazil, Japan, Taiwan, Korea, Chile and Mexico have posted strong gains since the first of the year -- and Hong Kong's Hang Seng Index has reached its highest level since late October 1997.
  • The worldwide slump in commodity prices seems to have bottomed out and a handful of commodity prices seem to have even firmed since the year began.
  • American companies with overseas interests are once again contemplating doing business in Asia.
  • Brazil's devaluation of its currency in January did not result in the financial domino effect of pulling Argentina down in its wake, as had been widely feared.

Nevertheless, Russia is attempting to get a big new International Monetary Fund loan to help stem capital flight estimated at $1.5 billion a month.

The chaos in financial markets did spill over into the productive sector, affecting output of factories, stores and offices. By the end of last year, one-third of the nations of the world were mired in recession or at least experiencing slower growth.

The World Bank predicts economic growth in developing nations and formerly communist countries -- which ran at a 3.1 percent annual rate in the first part of the 1990s -- to be a mere 1.5 percent this year, before rebounding to 3.7 percent in 2000.

Source: Michael M. Phillips, "Round the Globe, Signs Point to Final Days of the Financial Crisis," Wall Street Journal, April 14, 1999.


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