MercoPress. South Atlantic News Agency

UN forecasts 4% Latinamerican growth in 2005.

United Nations economic prospects for 2005 forecast 4% growth in Latinamerica and the Caribbean, above the world's 3,25% but below the 5,5% of 2004.

"The region will continue to grow in 2005 but probably will face a less favourable international scenario causing a deceleration of economic growth to 4%", reads the UN 2005 economic prospects report.

"Assuming that the international scenario will be characterized by a slight deceleration of the leading economies and if the signals of regional domestic demand recovery prove to be sustained, the region and particularly the main countries could be facing a new situation".

A situation where "a lesser contribution to growth from external demand could be compensated by a greater domestic demand" underlines the report.

However and is spite of the encouraging prospects, the UN report indicates that growth in Latinamerica and the Caribbean in 2005 will be the lowest of all developing regions in the world.

Africa is forecasted to grow 4,75%; eastern Asia 6,5%; southern Asia 6,25% and west Asia 4,5%. Regarding industrialized countries, the UN forecasts 3% expansion in the United States and 2,25% in Western Europe.

Overall world expansion is estimated in 3,25%, below last year's 4%.

Latinamerican expansion according to the report will be supported by strong macroeconomic factors such as relatively low interest rates, solid fiscal situations, low inflation, favourable exchange rates and another promising current account year.

"Under these circumstances macroeconomic policies will grant certain margin. Besides domestic demand represents 80% of total demand, so a slight increase will help compensate any overseas contraction".

The report also forecasts an increase in employment and salaries which should stimulate consumption and investment.

Before 2004, employment and salaries expanded modestly containing consumption, however last year "regional unemployment dropped from 10,7% to 10% and the relative growth of employment stimulated consumption. Sustained upturn in 2005 is expected to ignite salary levels and therefore consumption".

"Consumption expansion will spur investment creating a feed on spiral growth in some of the region's major countries". Brazil, Argentina and Venezuela are mentioned as countries which during 2004 experienced this phenomenon.

Finally the report highlights that world expansion is being sustained by the US consumption for manufactured goods, and the Chinese economy growing demand for commodities with a direct impact in basic products exports from Latinamerica.