MercoPress. South Atlantic News Agency

IDB calls on Latam to prepare for a slower US economy

A recession in United States does not seem likely but can't be discarded warned on Monday the InterAmerican Development Bank, IDB, emphasizing that the region's economic scenario in 2007 is closely linked to events in the world's leading economy.

"By its effects on Latinamerican export volumes and prices, a recession in the US could mean a loss of at least two percentage points in the region's forecasted growth", said the IDB in its 2006 annual report released in Guatemala where the multilateral bank is holding its annual general assembly. Some US economists have warned that the expansion of the depressed US housing market and growing problems in the mortgage industry could lead the economy to a recession by limiting consumer spending. However others argue that a fall in the housing sector would have a minimum impact and that the US economy will continue to expand albeit at a slower pace. The controversy intensified last month when former Federal Reserve chairman Alan Greespan described as "possible" a recession in the US economy towards the end of 2007. According to the IDB report, growth in Latinamerica and the Caribbean will slow down from 5.3% in 2006 to the range of 4 to 4.5% in 2007, with the possible exceptions of Brazil and Chile. Lower prices for oil and other exports could diminish by one percentage point the region's current account, which in that case would equally remain positive. Besides even when the fiscal situation in most countries of the region is expected to weaken, "there should be no threat to economic stability", adds the IDB report. "Next year will be crucial to consolidate the sustained growth tendencies with macroeconomic stability that the region has been enjoying for several years", indicates the report adding that the immediate challenges are "retaining fiscal discipline, strengthening tax revenue in the event of a future drop in extraordinary tax revenue (windfall) and improving the profile of foreign debt". The report adds that most countries in the region could help to boost growth by improving the business climate, beginning with facilitating the opening of new companies and ensuring the efficiency f the Judicial branch. IDB indicates that poverty in some countries has diminished, but quality jobs and extending social services to the poorest members of the community continues to lag and is a major challenge. Poverty level in 2006 in the region dropped below 40% for the first time since 1980 with extreme poverty below 15% Unemployment in the region during 2006 remained relatively stable and besides Venezuela, improvements were minimal. In Brazil unemployment edged up again. IDB president Luis Alberto Moreno called on the private sector to play a leading role in the fight against poverty in the region. "I'm convinced that the future of our countries will need to recognize that the private sector is a prime booster, although not the only one, of a fair, economic development for Latinamerica and the Caribbean", said Moreno to the IDB delegates during the annual assembly in Guatemala. In related news the World Bank's top economist for Latinamerica and the Caribbean Guillermo Perry said there are "no sufficient evidences" to anticipate a recession in the US, which anyhow will not impede the region from expanding at a slower pace but in the range of 5% in 2007. "The overall US economy keeps growing", said economist Perry.