Financial Crisis Had Moderate U.S. Consequences

March 8,2000

The international financial upheaval that began in Thailand in mid-1997 and spread to other Asian countries had a moderate impact on U.S. agricultural trade but set back economic growth and trade worldwide, says a new report from USDA.

World economic growth slipped from 3.2% in 1997 to 1.6% in 1998. The crisis led to depreciated currencies, reduced growth and higher interest rates in Indonesia. Thailand, South Korea, Russia, Brazil and other Latin American countries.

"The macroeconomic shocks affected agricultural prices, production, consumption and trade," says the report. "Currency depreciation helped agricultural producers but hurt consumers in crisis countries." The lower currency values that enhanced primary agricultural production and reduced imports improved the agricultural trade balance of these countries.

Non-crisis countries, including the United States, China, Japan and Taiwan were affected as well. Capital flight from the crisis countries helped keep U.S. interest rates low, stimulating investment and increasing growth.

In addition, the financial turmoil and depressed global commodity prices reduced U.S. agricultural exports and lowered costs for imports, keeping inflation in check but narrowing the agricultural trade.

A summary of the report is available on the Internet at http://usda.mannlib.cornell.edu/reports/erssor/international/wrs-bb/1999/ifca/wrs99_3s.asc.