The economic crisis gripping Southeast Asia could cut growth in the world's richest economies by up to 1 percentage point, the Organisation for Economic Co-operation and Development (OECD) said yesterday.
The body said the combined growth rate of its 29 member states could rise to 2.9 per cent, but said it had carried out a simulation exercise which showed the Asian crisis could knock nearly 1 percentage point off GDP growth next year.
It said the fall-out from the crisis could knock as much as 1.4 percentage points from Japan's economic growth, 0.7 percentage point from US growth and 0.8 percentage point from EU growth.
The report also sees strong EU growth with GDP rising 3 per cent in Germany and France in 1998 and 1999 with a 'steady, moderate tightening of monetary conditions'.
The OECD warned that the planned common interest rate under European economic and monetary union may cause problems for smaller countries, who despite healthy budgetary conditions might be forced to tighten fiscal policy.
It said interest rates in Europe's core economies were likely to rise to only 4.5 per cent, from the 3.3 per cent in the German repo rate.
The OECD said there was a 'somewhat uncomfortable degree of divergence in the cyclical positions of countries that might participate in EMU, notably between the three largest economies, where the expansion has been lagging, and most smaller countries that are at a more advanced stage of recovery'.
