APLA '07: World economic growth to slow

19 November 2007 01:47  [Source: ICIS news]

BUENOS AIRES (ICIS news)--World economic growth has been rising above its sustainable growth rate and will slow in the coming years, an Argentine economist said on Sunday.

“The US and EU are growing at rates more than their productive capacity,” said Ricardo Hector Arriazu at the 27th Annual Latin American Petrochemical Association (APLA) meeting. “The US economy has been growing at around 4%, but on a long-term basis, it cannot grow above 2.7%.”

He attributed the strong recent GDP growth in the US to rising real estate values, which caused people to spend. However, with real estate prices now falling, consumption will decline, he said.

And growth in China is unlikely to make up for the coming decline in growth in the US and Europe, said Arriazu. “The US, EU and Japan account for 70% of world GDP,” he said. “And China is not immune to cycles impacting the US and Europe.”

As for Latin American economies, while growth has been strong, it has traditionally lagged world economic growth and will continue to do so unless more sound investments are made.

“Latin American economic growth is typically 1.5 percentage points less than world GDP growth and undergoes deeper and more frequent cycles,” Arriazu said. “The reason is the investment rate, which is lower than the rest of the world, and especially Asia. Latin America cannot grow more than 3% on average on a sustainable basis. We are not making investments, and when we do, we do it badly.”

By: Joseph Chang
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