The international environment

Quarterly Bulletin 1998 Q1
Published on 01 March 1998

The financial and economic crisis in Asia has widened and deepened during 1997 and into 1998. There have been signs of contagion in other emerging markets. These developments are discussed separately in the note on page 26. The other main news is:

● Growth in the United States remained strong in the third quarter of 1997, but the Japanese economy has continued to slow.

● The recoveries in Germany and France have strengthened. Activity in Germany remained dependent on net exports, while domestic demand strengthened in France.

● By December 1997, most major equity indices had recovered from the correction in October 1997. In Japan, equity prices fell steadily in the second half of 1997, but have strengthened in January1998.

● Measured inflation remains low throughout the major six (M6) overseas economies.

● A majority of EU countries are expected to have fiscal deficits of 3% of GDP or less for 1997.

● Official interest rates were stable in most industrial countries, but bond yields have fallen.

GDP in the M6 overseas economies grew by 0.8% in the third quarter, up from 0.1% in the second quarter. Growth in the United States remains strong, but activity in Japan has slowed.

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