OTTAWA, Aug. 3 /CNW Telbec/ - In spite of the debt crisis in Europe, the global economy will avoid a double-dip recession, according to The Conference Board of Canada's World Outlook-Summer 2010.
"While there are certainly risks to the global economy, it is not expected to slip back into recession, thanks to healthy growth in the Asia Pacific region and in Latin America," said Kip Beckman, Principal Research Associate.
The world economy is forecast to expand by 3.5 per in 2010. However, the euro zone is expected to expand by only 1.1 per cent, and there is a chance that the region could slip back into recession toward the end of the year. Inventory restocking and fiscal stimulus has been responsible for most of the region's recent economic activity, but both of these supports are fading. Many countries in Europe have little choice but to further restrain spending due to ongoing pressure from foreign investors to reduce huge deficits.
Both Asia-Pacific and Latin America emerged from the 2008-09 recession in fairly good shape, because their banking sectors generally stayed away from risky investments in mortgage-backed securities. Real gross domestic product (GDP) across the Asia-Pacific region is expected to increase by 5.9 per cent in 2010 - by 8.3 per cent when the troubled Japanese economy is excluded. A decline in China's economic growth is inevitable and necessary, but the government appears to be taking the necessary steps to avoid a hard landing.
Real GDP in Latin America is set to grow by a healthy 4.5 per cent this year, and all major economies are expanding with the exception of Venezuela. Unlike previous debt crises, the region's stronger economic fundamentals will allow Latin America to avoid most of the negative repercussions of the current European situation.
SOURCE Conference Board of Canada
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