Rice damps down fears over the US economy

Business Materials 24 January 2008 02:54 (UTC +04:00)

( dpa ) - The US Secretary of State Condoleezza Rice moved Wednesday to dispel fears over the US economy after a day of mounting speculation.

Economists and leading financial experts have fuelled uncertainty during the past 24 hours with widely varying views over where the downturn might lead.

Rice, speaking at the World Economic Forum meeting in Davos, insisted: "The US economy is resilient and sound, and its long- term economic fundamentals are healthy.

"The United States continues to welcome foreign investment and free trade. And our economy will remain a leading engine of global economic growth."

Throughout a day of opinion-giving, the US economy was said to be suffering anything from a mild cold, to "a protracted case of pneumonia."

Some believed the illness could spread worldwide, others thought the emerging economies such as of India and China might hold the cure and prevent a global pandemic striking the markets.

US economist, Fred Bergsten said even if the US went into recession the rest of the world was now "decoupled" to the extent that any spill over damage would be limited: "When the US catches cold now maybe the rest of the world gets the sniffles but it certainly not pneumonia and I'm not even certain the world catches a cold either," he said.

Meanwhile a survey of global business leaders underscored a global split. It showed fear of a recession was the number one concern among CEO's globally, for the first time in more than a decade.

While business confidence had dropped dramatically in the US, down to 35 per cent from 55 per cent a year ago and also in Western Europe, it had surged among CEO's in India, China and Russia.

Samuel A DiPiazza, Global CEO of PricewaterhouseCoopers which published the survey said it showed a "tale of two worlds."

Up to 2,500 politicians, business leaders, including 13 heads of central banks and leaders of international organizations are attending the five-day meeting of the World Economic Forum.