By HOWARD FINE
The impact of Asia's financial crisis may have been overblown, according to UCLA Anderson's quarterly economic forecast.
Indeed, UCLA revised its 1998 employment growth rate upward from the 2.9 percent forecast in December to 3.3 percent.
Local economic and trade-industry experts say several factors have combined to blunt the impact of the Asian economic crisis:
* The strength of the U.S. economy has given companies that had been relying on trade with Asia time to shift their resources.
* The crisis has caused imports to surge and prices for imports to drop, which has actually helped several sectors of the region's economy.
* The scope of the crisis has been contained to a handful of countries in East Asia. Taiwan and China, two of California's largest trading partners, remain strong, as do other parts of the world.
Also, the main brunt of the crisis has not hit the region yet; it is expected to arrive by mid-year. But even when it does, it will not have the broad impact that many at first thought it would, according to UCLA's Anderson Forecast Executive Director Tom Lieser.
"The idea that the 'Asian contagion' would spread around the world and hit us hard here is somewhat overdone," Lieser said. "The problem has been confined to one geographic sector, and even within Asia, countries like China and Taiwan are still doing reasonably well. There are still many areas of the world that are economically strong, especially the U.S."
Lieser said the strength of the U.S. economy has been the main driving force behind California's economic recovery. The growth rate for the U.S. economy has remained above 3 percent for six consecutive quarters, he said.
"With a growth rate that strong, there is a lot of capacity to absorb shocks from Asia, at least for the foreseeable future," Lieser said.
With California exports to Asia flat overall, other areas of the world such as Latin American and Europe have taken up the slack. California's trade with Mexico shot up 33 percent last year to $12 billion more than twice the dollar drop in exports to Japan while exports to the Netherlands jumped 42 percent to $3.4 billion, almost offsetting the dollar drop in exports to South Korea.
But Lieser said California is not out of the woods yet. The consensus is that the impact of the Asian financial crisis will peak in the second half of the year.
Indeed, Asia's financial crisis is starting to be felt at the ports of Los Angeles and Long Beach, where first-quarter exports are off an estimated 8 percent and first-quarter imports are up an estimated 18 percent compared to the first quarter of last year, according to Guy Fox, chairman of freight-forwarding firm Global Transportation Services and chairman of the Foreign Trade Association of Southern California. Official first-quarter results won't be released until late this month.
Pasadena-based Parsons Corp., a global engineering and design firm, has been gradually shifting some of its resources into Latin America, according to Chairman and Chief Executive Jim McNulty.
UCLA's Lieser said California companies shifting their focus away from Asia and toward other parts of the world will likely also blunt the impact of the Asian economic crisis over the next several quarters.
Overall, the UCLA forecast projects that California will add jobs at a 3.3 percent clip this year, the same rate as last year, but up from last December's forecast of 2.9 percent employment growth for 1998. Lieser said the upward revision reflects faster growth in the national economy.
Next year, Lieser said, the state's employment growth rate will likely slow to 2.8 percent, in part because of a projected slowing in the growth rate of the national economy.
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