As 1998 came to a close, the global economic news was getting worse. The U.S. economy, in its 93rd month of growth, was standing apart-with an estimated annual GDP growth of 4 percent and an annual stock market gain of 16 percent. But growth projections for the rest of the world kept being revised downward.
In October, the International Monetary Fund pegged 1999 global economic growth at 2.5 percent-not bad overall. But this figure masks significant regional differences and contains much downside risk, if the IMF's restructuring and aid plans failed in key countries, as they so often seem to. In December, the IMF was back, revising its forecast downward to 2.2 percent and warning that "world growth could easily be cut a further percentage point in 1999 -and extend what would then effectively become an global recession at least until 2000."
That same month, the World Bank predicted 1999 global economic growth of a mere 1.9 percent. The World Bank predicts that 33 countries will see a drop in per capita income, including Brazil, Indonesia, and Russia. And such official pessimism was mirrored in private surveys. The more than 11,000 executives in 18 countries surveyed by Dun & Bradstreet were less optimistic about business conditions in 1998's fourth quarter than its third quarter.
And these reports were issued before the collapse of Brazil's "Real Plan," and the devaluation of its currency in January 1999. Brazil has long been considered the key element to keeping Latin America healthy, and its sickness is cause for global concern, although the immediate response of markets were positive.
So are we facing a global recession in 1999, or will this be the year that many emerging economies hit bottom and turn it around? In December 1998, Chief Executive talked with 13 CEOs and a Senator to get their projections on the 1999s global economy.
Kenneth L Lay
Chairman and CEO
I am reasonably optimistic about the global economy. Certainly we are going to have slower growth for the next year or so than we probably experienced two years ago. But the U.S. economy will remain reasonably strong, and with some reasonable growth in Europe and some of the other economies around the world stabilizing, I think we will work our way around this and hopefully be back to some pretty good growth by the year 2000.
I like the fact that the Europeans have had a unified rate cut. From the standpoint of the U.S., I would like to see an across the board tax cut in 1999.
Chairman and CEO
San Jose, CA
While the current economic downturn in Asia is the most serious in decades, signs of recovery are emerging. With some of the largest markets in the world, Asia remains an alluring and potentially lucrative place to do business for most multinationals.
Latin America will continue to suffer the ripple effect of the Asia crisis and will expect to experience an economic slowdown in 1999. However, trade is expected to continue to grow and foreign investment will only decline at a minimum.
The future for high-technology industries looks particularly strong as governments across these emerging regions look to build technology infrastructure to supplement economic reform as a key driver of renewed growth and sustainable recovery.
Domenico De Sole
President and CEO
Gucci Group NV
I was one of the first people to foresee that there were real problems in Asia. My sense now is that 1999 will be difficult, but will improve towards the end. Overall, in the long term, I continue to be very optimistic.
Gucci has done well during the Asian recession. We recognized the problem quickly, and became more careful and disciplined about costs. We had a very strong commitment to local business. Over the last year, we have acquired franchises in Korea, Thailand, and Guam and we expanded operations in Japan. …