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Krugman anticipates strong Latam recovery, but behind Asia

Thursday, August 20th 2009 - 16:04 UTC
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Nobel Prize winner Krugman says more unemployment can be expected before the situation returns to normal Nobel Prize winner Krugman says more unemployment can be expected before the situation returns to normal

Economics Nobel Prize Paul Krugman warned Wednesday that global real recovery will take time and that he’d be surprised to see within that scenario an improvement in the labour market. However he was upbeat about Latinamerica which he anticipated will recover faster that developed countries, although behind Asia.

Speaking at a forum, organized by Fiduciaria Bogota, on the challenges Colombia faces within the present global economy Krugman said that “the risk of a second depression has disappeared but warned that recovery will be slow and most probably accompanied by more unemployment at the global level”.

He also noted that economies can recover from a crisis by exporting a lot, but that unfortunately trade is still suffering and greater efforts must therefore be made in this respect.

Nevertheless “Latin America will be one of the regions that will recover more quickly, noting that the effect of the crisis was not very big. But “given the reduction in global trade and exports”, the global economy will fully recover “once the large countries definitively are back on their feet”.

Krugman said he expects the US, EU and Japanese economies to evolve positively during the second half of the year, “although below potential”. And even when Latinamerica will be more dynamic than advanced countries, “it will not overtake Asian economies which are displaying an impressive surge”.

The US economist said that China, which together with India have been signalled by experts as the thrust of global recovery, “has invested huge sums to stimulate the economy” while India is limited because of “its too highly dependent on exports and services”.

In a quick reference to the Spanish economy, (a heavy investor in Latinamerica) Krugman said there was not much to be expected given its “restricted framework of action” which depends on the Euro and can’t define its own monetary policies.

Finally on the topic of Colombia’s free trade agreement negotiations with the US, he argued that most of these agreements don't make for magical solutions, as in the case of Mexico where “it has not had the expected impact”.

Categories: Economy, Latin America.

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