The Institute of International Finance predicts economic troubles in seven Asian countries will result in a $35 billion increase in the U.S. trade deficit and depress growth around the world.
The institute, a lobbying group for international banks, predicted Tuesday there will be a $115 billion reduction in trade for industrial countries due to the Asian troubles and a $46 billion trade loss for developing countries."The East Asian financial crisis will impose a large trade balance shift on the global economy," the institute's economists forecast. "Recession and sharp currency depreciations in the region are reducing its imports and increasing exports."
The institute predicted the Asian turmoil would raise the U.S. trade deficit by $35 billion and shave 0.7 percentage points off the United States' economic growth.
For Japan, the institute's forecast was even more pessimistic, predicting a $41 billion trade loss and 1.4 percentage point cut in growth. It estimated the impact on Europe would be a $39 billion drop in trade and reduction in growth of 0.6 percentage points from what it would have been without the crisis.
The institute report did not predict that the Asian crisis would re-ignite, but it did say the fallout from the plunge in currencies and financial markets that began in Thailand a year ago had not yet run its course.
It estimated that developing countries would suffer a $46 billion loss in trade, with China feeling the biggest adverse effect at $21 billion, followed by Hong Kong with a $14 billion loss.
After Asia, the report said the biggest trade impacts in developing nations will occur in Mexico, which will suffer a $6 billion trade loss, 90 percent of which will occur because of a loss of export markets - primarily in the United States - because currency devaluations will make Asian products cheaper than Mexican goods.
The institute study focused on the effects of the sharp currency devaluations and severe slowdowns in growth that have occurred in the past year in South Korea, Thailand, Indonesia, the Philippines, Malaysia, Taiwan and Singapore.