YEAR OF LIVING DANGEROUSLY

The year 1998 was full of turmoil: crisis-hit Asia slumped; Japan contracted; Russia defaulted; commodity prices tumbled; markets gyrated; Brazil struggled; inflation disappeared; interest rates fell. Fortunately, Wall Street's "irrationally exuberant" boot-straps helped lift the world economy. It would be optimistic to rely on this happening again in 1999. The year 1998 was good for the west, but dreadful for the rest. The IMF forecasts another year of 2.2 per cent growth in 1999, with expansion in the advanced economies declining from 2 to just 1.6 per cent, but modest recovery in developing countries. The US is expected to manage only 1.8 per cent, while Japan's economy will shrink again, if only by 0.5 per cent. This year was disturbingly exciting; 1999 could prove no less so. The world economy needs careful guidance and reform. Those in charge of the world's biggest economies must resolve to rise to the challenge.