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Latin America is glad to have turned the page on its economic performance in 2002. Its fortunes this year may prove only marginally less volatile. A weak US economy, on which much of the region, especially Mexico depends, also weighed on the Latin American output.
Earlier this month, the United Nations’ Economic Commission on Latin America and the Caribbean estimated the region’s economies together contracted 0.5 per cent this year, and reckons they will grow a collective 2.1 per cent in 2003. Performance will likely continue to be choppiest in Mexico, Brazil, Argentina and Venezuela, Latin America’s biggest economies, respectively.
In the other regional giant, the Brazil’s central bank said it estimated growth this year at 1.6 per cent and projected a 2.8 per cent expansion in 2003. That’s more optimistic than the calculations from the three investment firms, which peg the country’s growth at 1.3 per cent in 2002 and 1.8 per cent in 2003.
The prospects in Brazil and Mexico look positively rosy compared to those in Argentina and Venezuela, the region’s third and fourth largest economies, respectively. After it erected the capital controls and defaulted on its public debt a year ago, Argentina moved in January to break the peso’s 11-year parity with the dollar, letting the currency fall 70 per cent against the greenback.
Asia is set to lead world growth this year despite risks to the regional and global economies from a possible war in the Middle East, terrorist attacks and Japan’s weakness.
The International Monetary Fund has estimated the global economic growth this year of 3.7 per cent, up from the forecast for last year of 2.8 per cent. However, growth in most Asian economies should be higher than the global estimate.
Asia weathered the global slowdown better than other regions, and expectation is that this year as well, growth in most of the Asian countries will be above the global average. The IMF expects Asian industrialized economies, apart from Japan, to grow between 3.5 per cent and six per cent this year. The growth of the larger Southeast Asian economies is expected to average four per cent.
Large oil importers like South Korea and India would suffer from higher energy costs. And the region as a whole could find itself facing a decline in demand for its exports, a fall-off in inward investment and damaged business and consumer sentiment at home.
Asia’s most trade-dependent economies — Singapore, Malaysia, Hong Kong and Taiwan — would suffer badly from any US slowdown. And it’s not only the region’s trade that could suffer. An extended conflict would damage the Middle Eastern economies, reducing the multi-billion-dollar flows of remittances from expatriates working in the Gulf to countries like India and the Philippines.
Lower crude production last year reflected negatively on economies in the Gulf, as oil continues to account for 35 per cent of the region’s GDP, 75 per cent of government revenues and 85 per cent of the total exports. Nevertheless, the region’s non-oil sectors more than made up for the negative growth recorded by the oil sector.
Government budgets were generally expansionary and there appears to have been sufficient activity in the private sectors supported by lower interest rates and reform and liberalization moves. Modest growth in the real GDP is projected for 2003.
The GCC customs union agreement which came into effect on January 1, singled the birth of a Gulf common market with 31 million customers and a purchasing power close to $350 billion.
