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Slowing US housing market to drag down world economy { January 10 2007 } Original Source Link: (May no longer be active)
http://www.boston.com/news/nation/washington/articles/2007/01/10/weak_us_housing_to_drag_down_2007_world_economy_un/http://www.boston.com/news/nation/washington/articles/2007/01/10/weak_us_housing_to_drag_down_2007_world_economy_un/
Weak US housing to drag down 2007 world economy-UN
By Irwin Arieff, Reuters | January 10, 2007
UNITED NATIONS --A weakening U.S. housing market will slow world economic growth to 3.2 percent in 2007, from the brisk 3.8 percent pace set in 2006, United Nations forecasters predicted Wednesday.
The faltering housing sector in the United States, the world's largest economy, will drag down U.S. growth to 2.2 percent, a full percentage point below last year's rate, the U.N. Department of Economic and Social Affairs reported in its annual world economic survey.
Japan, where growth is expected to slow to below 2 percent this year, and Europe, due to expand at about a 2 percent rate, are "not strong enough to replace the U.S. as the engine for growth of the world economy," the world body said.
But a global recession can be avoided, resulting in a desired "soft landing" for the world economy, because there is room for central bank interest rate cuts and U.S. corporate finances appear healthy, the report added.
The East Asian economies, including China, are expected to carry on their strong growth pattern this year, expanding at a slightly slower 7.5 percent rate after growing 7.7 percent on average in 2006. South Asia, led by India, is also expected to slow only a bit from the 6.7 percent pace set last year, the report said.
Developing nations are seen growing 5.9 percent this year, compared to 6.5 percent in 2006, while transitional economies -- those of the former Soviet Republics and Eastern European nations -- are expected to slow to a 6.5 percent growth rate this year from 7.2 percent, according to the report.
While the world economy still faces risks from vast global imbalances -- including a deficit in the U.S. current account, a measure of trade, of nearly $900 billion in 2006 -- these imbalances are expected to narrow somewhat this year, the U.N. forecasters projected.
Slower U.S. growth, lower oil prices and further declines in the U.S. dollar are all seen contributing to declining U.S. imports and greater exports, they said.
Risks nonetheless remain, the report said. The huge current account deficit and U.S. budget deficits have brought U.S. indebtedness to such levels that a shock correction to the imbalances could yet occur, it said.
In this case, "confidence in the dollar as the world's main reserve currency could erode rapidly," the forecast said.
© Copyright 2007 The New York Times Company
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