The Asian financial crisis of 1997-98 was the classic cloud with the silver lining.
The worse it got, the better the economy worked for most companies and consumers in the Washington region -- and most Americans, for that matter.
Cheap goods from Asia helped restrain inflation, boosting U.S. consumers' buying power. The Federal Reserve nudged interest rates down to head off a wider crisis, making housing, business expansion and consumer credit purchases more affordable.
Now the tables have been turned.
"The Asian crisis was terrific for the American economy, except for manufacturing. Ironically, the recovery [there] will have the opposite effect," said Anirban Basu, director of applied economics at Towson University's RESI, a regional economic research institute.
Exporters in Virginia and Maryland whose sales to the Pacific Rim were battered by the crisis are due for better results this year and next.
"We expect exports from Virginia will improve [next year]," said Ann Battle, an economist with Chmura Economics and Analytics in Richmond. "Some of that should be evident already."
But with their home markets recovering, Asian producers won't be so eager to slash export prices on shipments to this country, and their higher prices are expected to add to inflationary pressures here, prompting higher interest rates that will slow the economy.
"We've already begun to see the impact in higher mortgage rates and slower home sales," Basu said.
The winners and losers created by the Asian crisis in Virginia and Maryland were highlighted recently in separate reports by the Chmura firm and by RESI. (The data, from the Census Bureau, sometimes exaggerate shipments from states with major ports, such as Virginia and Maryland.)
Virginia's tobacco producers and aluminum producers suffered the most, as each saw exports drop by more than $100 million between 1997 and 1998.
In Maryland, steel shipments and food exports were hit hardest by sinking worldwide prices, causing a $114 million drop in sales for both industries combined in 1998.
These losses didn't leave much of a mark on either state last year.
Virginia's exports fell by one-half percent between 1997 and 1998, from $11.5 billion to $11.46 billion.
But foreign shipments account for only 5 cents of every $1 generated by the Virginia economy, and with a technology boom underway in Northern Virginia, the state hardly felt the loss, Battle notes.
On the export front, the Asia business Virginia firms lost was offset by increased shipments of transportation equipment to Canada and of fabricated metal products to Mexico.
Despite its port, Maryland is not a comparatively big exporter, Basu notes, insulating it against the Asian tremors. In 1998, Maryland exported $20,600 worth of merchandise for each manufacturing worker in the state, far below the national average of $36,245 per manufacturing worker.
Overall, Maryland's exports actually increased 4 percent between 1997 and 1998, thanks to a surge in shipments of electronics, chemicals and transportation products -- all of which grew at double-digit rates over the past year.
Maryland exports rose from $3.86 billion in 1997 to $4 billion last year.
Now the interplay of inflation, import and export prices and interest rates is headed in a new direction, and economists like Battle and Basu are predicting a slower economy -- and a different cast of winners and losers -- in the new year.
The Asian financial crisis didn't harm most exports from the mid-Atlantic region.
Selected export product percent changes from 1997 to 1998:
Metal products 42.6%
Transportation equipment 11.9
Food - 26.7
Metals - 43.3
Metal products 44.1%
Computers, industrial machinery - 2.5
Tobacco - 3.0
Metals - 35.7
SOURCE: Census Bureau