Western Hemisphere growth hampered by U.S.: IMF

Fri Apr 11, 2008 3:22pm EDT
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By Daniel Bases

WASHINGTON (Reuters) - The U.S. economic downturn is likely to slow economic growth in other Western Hemisphere countries while high-priced commodities and domestic demand is seen exacerbating inflation pressures, the IMF said on Friday.

U.S. economic growth is expected to be an anemic 0.5 percent in 2008, rising to just 0.6 percent next year, according to IMF estimates, as fiscal and monetary stimulus plans begin to bear fruit and bank balance sheets are cleaned up from the subprime mortgage-related losses.

The one overriding risk is increased inflation pressures, especially from food prices, the IMF said in its regional economic outlook report.

"In this situation, where we have shocks from external sources such as food prices, the main priority is to avoid these getting either entrenched or entering wage negotiations," IMF Western Hemisphere director Anoop Singh told reporters.

"That would be my number one candidate that we have to prevent the second-round effects, clearly, but where these second-round effects generally are the most potent and the most dangerous is when they affect wage negotiations," he said.

Strong demand from emerging markets and increased use of agricultural products and energy in making biofuels "suggest that international pressures on food and energy are likely to remain."

For low-income countries in the region, food price inflation hits particularly hard as the poor devote a larger share of their income to food.

Canada's economy is projected to grow 1.3 percent this year, less than half the rate of growth in 2007. Growth is expected to rebound to 1.9 percent in 2009.   Continued...