Six private think tanks and one bank have lowered their projections of real economic growth for the current fiscal year, most of them to less than 1 percent.Forecasts by the institutions range from 1.1 percent to minus 0.5 percent growth in fiscal 1997, which ends in March. The pessimism reflects prolonged sluggishness from the April consumption tax increase and other factors.In June and July, the firms predicted growth of between 1.1 percent and 1.9 percent in the gross domestic product, which is the value of goods and services produced by the economy. Six of the institutions that made forecasts for fiscal 1998 agreed this time that the economy would eventually pick up, predicting growth ranging from 1 percent to 1.9 percent. But they said the trend would remain fragile.The drop in personal consumption is seen as a major factor in the year's dismal figures. The continuing repercussions following a rush to buy before the tax increase as well as the end of special income and residential tax breaks.The adverse impact on durable goods sales and housing investments will decrease but still linger until December, according to Dai-ichi Life Research Institute. "Inventories have built up more than expected and inventory adjustment will continue through the middle of fiscal 1998," it said.Daiwa Institute of Research, which revised its forecast from 1.1 percent to minus 0.5 percent, said external demand supports a stagnant domestic demand, a typical pattern in a sluggish economy. In fiscal 1998, the aftereffects of the tax increase will fade and the economy will slowly improve, the think tanks said.But personal consumption will probably not fully bottom out, Sumitomo-Life Research Institute said, because wages and employment will worsen as corporate earnings become sluggish.NCB Research Institute said private demand will lack momentum as growth of fixed investments slow amid stagnant corporate profits. Also, personal consumption cannot recover under structural changes, including the heavier burden of insurance contributions.
