Washington - For decades, Latin America has suffered badly during economic downturns in the United States, but the International Monetary Fund's latest global growth forecast predicts that a looming US recession will have a "very different outcome" this time around. Latin America's experience is being replicated in developing countries around the world, as a result of what World Bank President Robert Zoellick this week said were "alternate poles of growth" now competing with the world's largest economy.
The IMF's World Economic Outlook report, released Wednesday, forecast a mild recession this year in the United States and sluggish growth in Europe due to ongoing turmoil in the housing and financial markets.
The Washington-based international institution said that US growth for 2008 would slow to 0.5 per cent, a full percentage point lower than the IMF's last estimate in January. The US economy expanded by 2.2 per cent in 2007.
Yet emerging giants including China, India and Brazil will continue to enjoy well above average growth despite the downturn in the United States and other advanced economies, in part due to strong domestic demand and greater intra-region trading.
Growth around the world will fall to 3.7 per cent in 2008, a "substantial slowdown" from last year's 4.9-per-cent rate, IMF chief economist Simon Johnson told reporters.
There is a 25-per-cent chance of a global recession, which the IMF defines as growth below 3 per cent. Yet Johnson said the wider slowdown was "much less pronounced than in past episodes."
The IMF attributed the relatively rosy world outlook to surging energy and commodities prices, which have boosted exports by developing countries. Crude oil rose to a record 112.21 dollars per barrel Wednesday in New York.
"The effects of financial turmoil in the United States have been to lower the prospects for growth, but somewhat paradoxically they have also increased oil prices, metals prices and, of course, food prices," Johnson said.
So while the US and Europe suffer a slowdown - euro-area expansion was projected at 1.4 per cent this year, after 2.6-per-cent growth in 2007 - the rise in prices has left developing economies now more worried about their own inflationary pressures than the sluggish growth that is hitting the industrial nations that consume their raw materials.
The Middle East's oil exporting economies, for example, were forecast to grow this year by a robust 6 per cent, but that comes with a 12.2-per-cent increase in consumer prices.
Menzie Chinn, a professor of economics at the University of Wisconsin, warned that developing countries could yet see commodity prices drop and growth rates stall if demand in the US and Europe "cools substantially."
"There is a danger of getting used to being at the high end of commodity prices, ... as if they are going to continue forever," Chinn told Deutsche Presse-Agentur dpa.
That would also hit the economies south of the United States.
Growth in South America and Mexico was forecast to slow to 4.3 per cent from 5.6 per cent in 2007, as the region's "resilient economies" will be "dampened but not overwhelmed by the slowdown in the United States," the IMF said.
The report acknowledges the marked change from past downturns, as "Latin America has invariably been hit hard by slowdowns in the United States."
World Bank officials said Wednesday that the shift in South America comes not only from the boost in commodity prices but from reduced dependence on US capital and also from China's increasing role as a trading partner.
But that doesn't mean the United States has lost all of its economic influence.
Mexico, its immediate southern neighbour, has been hit hard by slowing US demand, while the fallout from losses in financial institutions remained the biggest "downside risk" to the world economy, the IMF said.
In a separate report Tuesday, the IMF said that banks could lose nearly 1 trillion dollars from writedowns of mortgage-backed securities and other assets at the heart of the current financial crisis.
"The US is still at the centre of the world financial system," Chinn said. "Our banks are still important."
