Thursday, October 22nd 2009 - 08:10 UTC

Developed countries recovery “rests on growth in Asia and Latinamerica”

The economic recovery of developed countries, including the United States, rests largely on the growth of developing Asian and Latin American countries, the chief economist of Spanish banking group BBVA said this week.

Nathaniel Karp, chief economist of Spanish banking group BBVA

Economist Nathaniel Karp kicked off the 2009 Global Trade & Transportation Symposium by explaining that growth in developed countries will be stagnant for the next several years.

The US is better positioned to tap into Asian countries’ growth, however, because its economy is more flexible and has handled the financial meltdown better. Plus, increased debt and excessive lending by Eastern European countries will prove a liability to the European Union’s growth.

“I would stay away from Eastern Europe unless you are planning on going on holiday,” said Karp.

He said the economies of China, India, Singapore, Peru and Brazil are expected to grow by 4 to 6% annually. The growth of these countries’ middle class, especially in China, will drive consumption of imports.

Karp said US recovery will be slow partly because consumers are saving more and the commercial real estate market isn’t out of the storm yet. The country’s debt continues to climb which means that either taxes have to be raised, or government spending significantly cut. “The question is what is going to drive growth,” he said. “At this point, it’s uncertain”.

Karp said the US federal government has to focus on the asset side and continue to tackle the credit market. Until the various credit markets are restored, interest rates can’t be increased. He said a decrease in excess reserves will signal restoration of credit markets.

Published in: Economy, Latin America.

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1 Tim (#) Oct 22nd, 2009 - 01:02 pm Report abuse
This is a rather interesting analysis, although nothing surprizing for those who have been following the impact of the “global” recession on South America. What is very sad, however, is how the Obama administration continues to miss the boat on this. The White House is still babbling about giving more chump change to the poor and senior citizens (a $250 stimulus check), subsidized credit to small businesses that hire more workers, etc.. A real boost to the U.S. economy would be increasing exports, however. Given that South America is one of the few places in the world that will have the money to buy what the US is offering, when is the Obama administation going to revive the negotiations for a Free Trade Area of the Americas?

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