The bank which is intimately associated with the financing of diamond business in Antwerp, points out in this context that ``if the American economy and especially the psychologically important Dow Jones index holds up well, the diamond market in the country is set for a continued growth.The same is expected in the European diamond market. On the other hand, we expected that the Japanese and Asia Pacific markets will need some more time before a substantial improvement will become noticeable. Especially in Japan we do not expect the market to improve until well into the next century.Notwithstanding the cautious optimism about the future it must be realised that the ripple effect moves in both directions. A small increase in demand may immediately have a major positive impact in the cutting centres.

This depends solely on thesentiments within the pipelines and the willingness of the intermediate phases in the pipeline to re-stock and replenish at higher levels. It is our hope that caution will balance sentiment and need.''

Reviewing the performance of the industry in 1998 which, according to it, was a difficult year the Diamond Bank says that ``when measured in US dollars the worldwide demand probably declined by 3 per cent during the year. This slight decline can be considered a tribute to the marketing skills and resilience of the industry.

In 1997 difficulties occurred mostly in the second half, while in 1998 the full year was problematic. Fortunately, the situation improved towards the end of the year that was marked by a strong Christmas season.''

``This trend is further borne out by a restoration of confidence and a stronger though still fragile market in early 1999. There is no doubt that the diamond market has bottomed out and that from hereon moderate growth expectations will certainly be justified. The restrictivedistribution policies triggered selective shortage of those goods that are in demand which facilitated the firming up of prices. Though the issue of manufacturing profitability has not yet been fully resolved, there is no doubt that in the latter part of the last year we have seen a slight improvement in margins.''

The Diamond Bank estimates the 1998 worldwide diamond jewellery sales to reach about US$49 billion with a polished diamond content of some US$11.5 billion. The strongest market performance was in the USA where the diamond retail market is expected to have grown by 9 per cent.

In Japan the ripple effect manifested a drop in jewellery sales of 19 per cent although the actual decrease in diamond value was only 12 per cent. Europe's diamond jewellery market both in retail and diamond values grew by some five per cent. However, the East Asian markets were hit the hardest by declines in the range of 35-40 per cent.

The economic realities exacerbated last year the process of restructuring andconsolidation in the cutting centres. Non-market related problems such as high labour costs, loss of international competitiveness and profitability erosion which all pre-dated the Asian market crisis are fundamental and structural in nature.

Therefore companies in the traditional centres especially Belgium and Israel increasingly moved their actual processing to low labour cost countries or merged, in order to reap the benefits of economies of scale. The Diamond Bank expects that trend to intensify.