According to a survey of more than 30 leading economists, the Year
2000 technology problem will have a minimal effect on the economy over the next
couple of years, spurring growth in 1999 and then contraction in 2000.
The survey, conducted by the Federal
Reserve Bank of Philadelphia , found that 29 of 33 forecasters said they
expect some impact on the growth of the economy by the Y2K computer glitch.
The quarterly survey of economists by the federal bank revealed a wide range of forecasts for the Y2K impact, from a decline in real gross domestic product of 1 percentage point to a climb of 0.5 percentage points. On average, however, the economists saw a 0.1 percentage point gross domestic product (GDP) boost brought by spending to fix the computer date problem.
For 2000, the forecasts ranged from a decline of 1.0 to a gain of 0.4, with the average at minus 0.3 percentage points, indicating that the forecasters expect real GDP growth to be 0.3 points lower in 2000 as a result of the conversion.
A number of economists have forecast anywhere from a minimal to a large impact
on the growth of the economy by the Y2K computer problem. One of those who sees a more significant impact is Ed Yardeni, chief economist for Deutsche Bank Securities, who recently
said the probability of a recession had increased to 70 percent from his previous forecast of 60 percent, and he said inaction on the part of global leaders and slow progress by the U.S. government had increased the likelihood of a crisis.
The Y2K bug comes from antiquated hardware and software formats that denote years in two-digit formats, such as "98" for 1998 and "99" for 1999. The glitch will occur in 2000, when computers are either fooled into thinking the year is 1900 or interpret the 2000 as a meaningless "00." The glitch could throw out of whack everything from bank systems to building security procedures, critics warn.
A recent study by British computer services and business consultancy Cap Gemini estimated the cost of dealing
with the millennium bug in Europe and the United States has risen 20 percent
in the last six months and some organizations now may not finish their conversion work in time.
The survey found the total estimated cost of dealing with the problem had risen to $858 billion from $719 billion predicted in April. Cap Gemini is one of many firms that provides Y2K research as well as Y2K consultants and services to companies and organizations tackling the problem.
The Philadelphia Fed's Survey of Professional Forecasters was formerly conducted by the American Statistical Association and the National Bureau of Economic Research.