APEC Business Advisory Council (ABAC) Chairman Hernan Somerville yesterday expressed a bullish view of the world economy for the next two years.
Somerville, who attended the second ABAC meeting in Taipei, said this year would be a good economic year globally although uncertainties, including expected interest-rate rises and high oil prices, still threaten the recovery.
US Federal Reserve policy-makers last week dropped a pledge to be "patient" about raising the key US interest rate target, which prompted market concerns that borrowing costs for businesses would increase.
But Somerville, president of the Chilean Bankers Association and former president of the Latin American Federation of Banks, said the world market need not overreact to the expected increase in interest rates, which he said would eventually go up.
He dismissed concerns over rising crude oil prices, which jumped to US$40 per barrel on Wednesday, saying that the Organization of Petroleum Exporting Countries (OPEC) would come to realize that it is necessary to have a long-term price at a reasonable level.
As for the state of US economy, Somerville said the US had to tackle its budget deficit and trade deficit while neutralizing its previous expansionary fiscal policies so that the economy can grow by at least 4 percent this year.
Strength in the US and Chinese economies was hauling the rest of the world out of recession, and investment was kicking in as a major engine of activity, the International Monetary Fund said in its semi-annual World Economic Outlook last month.
World economic growth is expected to jump from 3.9 percent last year to 4.6 percent this year -- the fastest since 2000 -- and 4.4 percent next year, the IMF forecast.
China's recent plan to cool its overheated economy is important for the Asia-Pacific region's economic prosperity, Somerville said.
Although uncertainties about China's economy were highlighted recently by economists, after Beijing told its banks to stop lending to some sectors to avoid stoking inflation, Somerville said that the underlying economic situation in China remained quite healthy.
"China should be able to manage a soft landing where there's a need for soft-landing," Somerville said.
Somerville yesterday also expressed optimism about Taiwan's economy, lauding Taiwan's productive people and expertise, high savings and social discipline.
"One of the most dynamic parts of the world is here," Somerville said.
He made the comment when asked about Taiwan's frustration in trying to sign free-trade agreements with other economies.
So far it has signed such a deal with only Panama, one of fewer than 30 countries that recognize Taiwan.
By removing trade barriers and increasing the number of bilateral free-trade-agreements, the world economy should seek every opportunity for trade without discrimination, he said.
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