If 1997 was the year the markets and investors squealed in horror at the economic crisis inflicting Southeast Asia, 1998 is likely to see the man in the street feel the full effects of the crisis. As the new year dawns, analysts expect the impact of tumbling currencies to intensify as deflation and a string of social and political factors enter the equation. Economists say the direct consequences of the 1997 market meltdown have yet to fully filter through, with many firms having so far put off the inevitable. 'There's going to be a lot more pain,' Philip Wee, a regional economist at Standard Chartered Bank, said. The liquidity crunch is expected to tighten and banks will baulk at continue rolling over doubtful debt forever. 'Consumption will fall, unemployment will rise, people on the street will feel the pinch,' Jimmy Koh, a regional economist at Independent Economic Analysis (Idea), said. Millions of people could find themselves without a job which could result in unrest. In Southeast Asia, economic growth is likely to average about 2 per cent this year, with Thailand in full recession and others coming closer to it, according to J.P. Morgan forecasts. Geoff Lewis, the chief regional economist at Dresdner Kleinwort Benson, said most of these nations needed annual gross domestic product growth of 6 to 7 per cent in order to maintain employment at existing levels, which, given IMF austerity measures, would be impossible. Currency devaluations, which in some Asian countries have been more than 50 per cent in less than six months, will sharply raise import costs this year. However, prices of domestic products could tumble because of the impact of the crisis on the public's pockets. Bernhard Eschweiler, the head of Asian economic research at J.P. Morgan, said: 'The slowdown will inevitably bring disinflation and in some areas outright deflation. 'Deflation will be most visible where prices have risen the most or over-investment has been most extreme. 'For most countries, this is the real estate sector, and, indeed, falling rents and property prices will form the core of emerging Asia's deflation.' Of the Southeast Asian currencies, the Indonesian rupiah is seen as the most vulnerable to further downside this year, having been the worst-performing currency in the world last year. Analysts said the Singapore dollar also had potential for continued weakness as it plays partial catch-up with its regional neighbours. Southeast Asian nations are likely to remain caught in a vicious cycle of currency depreciation leading to increased debt servicing costs which in turn will lead to further currency weakness. One big question mark hanging over the region next year will be whether any governments go down the road of a debt moratorium or capital controls to break the cycle. The International Monetary Fund rescue packages being offered to Thailand and Indonesia are little different from those prescribed for Latin American countries in the 1980s. The IMF's brand of austerity initiative did help reduce inflation and spur some growth, but in almost all cases had the side-effect of making life worse for the poor. For most people in Southeast Asia, there is no social safety net or alternate means to support their families. If threatened workers take to the streets, experts warn, the region's political calm could be shattered. Indonesia and the Philippines are seen as having the highest potential for unrest given that presidential elections are coming up in March and May respectively. Southeast Asia will be further impacted by the contagion effect of its crisis on Northeast Asia. By the end of January, Bank of Korea is likely to have exhausted US$24 billion of aid and analysts say there is a real risk that its whole economy could collapse under the weight of its foreign debts. 'The whole $57 billion [international aid package] could be going down the drain,' Mr Koh, from Idea, said. There is risk the Hong Kong dollar's peg to the US dollar could be axed to help regain the SAR's competitiveness. There will also be pressure on the mainland to devalue the yuan. Virtually the only good news about this new year is that as it draws to a close, analysts predict there may at least be a pick-up in expectations as people begin to hope that the suffering may soon be over.