No Crisis, but a Liquidity trap instead

Merrill Lynch economists say the region is safe from a 1997-style crisis, but that the emergence of a ''liquidity trap'' will stunt East Asia''s growth prospects.

The simultaneous weakening of Europe, Japan and the US could lead global growth to its lowest rates in 30 years, with negative consequences for Asia, says Bill Belchere, Merrill Lynch's head of Asia Pacific economic global fixed income strategy.

Merrill has cut its global growth forecast from by 2% to 1.3% this year and from 3.5% to 2.2% in 2002. This compares to an average growth rate of 3.7% for the last 30 years.

But, East Asia is generally safe...

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