MercoPress. South Atlantic News Agency

Crude prices to ease towards end of 2005.

The deceleration of the world economy in 2005 will cause a descent in oil prices forecasted this Tuesday the German Institute of Economic Studies in Munich, IFO.

"With the slowing down of the world economy crude prices will also yield", said Hans-Werner Sinn president of the respected German institution with main offices in Munich.

The soaring prices of crude are mainly a consequence of the current strong demand and not a supply shortage, according to IFO which argues that as world growth drops from 5% in 2004 to 4,3% in 2005, "the situation created with oil prices will improve".

According to IFO towards the end of 2005, oil prices will stand below 37 US dollars the barrel. This Tuesday Gulf of Mexico light crude reached 56 US dollars per barrel. The IFO report is in line with the latest IMF forecast of a 4,3% world expansion in 2005.

"Given the most recent development regarding crude prices, we believe we could have an expansion forecast even below that advanced last month", said Agustin Carstens, IMF Director General..

"We're not still in a position to further modify downwards prospects but the risk is increasing", said Mr. Carstens during a conference held in Madrid, Spain, adding that 2005 certainly won't be as good as 2004, "but will not turn out to be disastrous".

Mr. Carstens, a former Mexican Deputy Finance Minister indicated that a slower world growth will not have such an impact in Latinamerica overall, since the continent is rich in oil reserves and its participation in world trade is relatively low.

"World cycles don't have such an impact in Latinamerica", underlined Mr. Carstens.

However the IMF official called on Latinamerican countries to attempt further liberalization reforms in labour markets and commercial legislation, and praised regional financial stability which has reflected in lower credit risk rates.

"There's been an extraordinary improvement in the quality of loans for emerging markets", emphasized Mr.Carstens who called upon regional governments to stand by recent liberal reforms in spite of a coming biennial of general elections in the main countries of the area.