Interesting CNN Article: US Recession / Latin America
GUATEMALA CITY, Guatemala (Reuters) -- A recession in the United States seems unlikely but cannot be ruled out, Latin America's largest lender warned Monday, saying the region's 2007 economic prospects depended on its northern neighbor.
"Through its effects on the volumes and prices of Latin American exports, a U.S. recession would translate into at least two percentage points less growth in the region," the Inter-American Development Bank (IADB) said in its 2006 annual report released during its annual meeting in Guatemala.
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ECONOMY
In the past week Bernanke and Greenspan expressed differing opinions on the outlook of the economy. Ali Velshi reports.
Some U.S.-based economists are warning that a spillover from the slowing U.S. housing market could push the U.S. economy into recession as consumers pull back spending.
Others, argue that the housing downturn will have a minimal impact and the U.S. economy will continue to grow, albeit at a slower pace.
The debate intensified last month when former U.S. Federal Reserve Chairman Alan Greenspan said it was "possible" that the U.S. economy might fall into recession by the end of 2007, with signs that the current economic cycle was cresting.
A National Association for Business Economics survey last month showed that experts see U.S. economic growth at 2.7 percent this year, the slowest rate since 1.6 percent in 2002.
The IADB said the current outlook suggests growth in Latin America and the Caribbean will slow to between 4 to 4.5 percent in 2007, with the possible exceptions of Brazil and Chile, from 5.3 percent last year.
Lower prices for oil and other exports may lower the current account by 1 percent of GDP but is likely to remain in the black, it said.
Private sector
Fiscal positions of most countries are expected to weaken, but without jeopardizing economic stability, the IADB added.
"The coming year will be critical for consolidating the sustained growth trends with macroeconomic stability that the region has maintained for several years.
"The most immediate challenges are to maintain fiscal discipline, strengthen tax collections against future declines in extraordinary tax revenue and improve public debt profile," the IADB said.
It said most countries could boost growth by improving their business climates, beginning with making it easier to start a business, to improving the efficiency of the courts.
The IADB said poverty had declined in some countries, but creating quality jobs and extending social services to the poorest were still a big challenge.
Poverty levels fell below 40 percent across the region for the first time since 1980, with extreme poverty under 15 percent.
The IADB said average unemployment rates for the region changed very little in 2006, and apart from Venezuela improvements, elsewhere were small. Brazil saw a slight increase in its jobless rate, it added.
IADB President Luis Alberto Moreno appealed to the private sector to play a bigger role in helping reduce poverty in the region.
"I am convinced that the future of our countries will require recognition that the private sector is a key driver, although not the only one, in equitable economic development in Latin America and the Caribbean," Moreno told delegates at the IADB's annual meetings.
A recession in the U.S. would hit homebuilders such as Pulte (Charts) and D.R. Horton (Charts), as well as retailers Wal-Mart (Charts) and Target (Charts).
