Economic Forecast: Clouds For U.S., Europe; Storms Elsewhere

Forget about bright, sunny, cloudless days for the rest of 1998 as far as the world economy is concerned. More deeply affected by the Asian financial crisis than first anticipated, the U.S. will manage only 2% to 2.5% inflation-adjusted growth in gross domestic product during the second half of the year, opines Merrill Lynch & Co. Inc.

Japan, even with a new prime minister, will see its economy shrink 1.1% this year. Europe will be slowing its rate of growth, although it's likely to post a respectable 2.7% rate for the year. And Russia, even with a new infusion of cash from the International Monetary Fund, won't generate enough growth to pay off its debts. One reason, says Merrill Lynch: Russia can't raise taxes high enough to produce a budget surplus in its cash-poor economy.