Fear of US recession dominates WEF meet

"The US is heading towards recession. But it may not have that much an impact because of a shift in growth momentum towards India, China and East Asian countries," Kamal Nath said while participating in a panel discussion in Davos on Wednesday.

Ruling out any major impact on India of a slowdown in the US economy, he said even though the US is India's major trading partner, growth in the south Asian nation is mainly dependent on domestic demand.

Trade growth with China and other European countries was also growing, Nath added.

Participating in the discussion on issues likely to dominate the global economy over the next 18 months, World Bank Managing Director Ngozi Okonjo Iweala said apart from possible US recession, which will have its impact on Europe and other economies, rising food and energy prices would be an issue to contend with.

Moderating the first session of economists, Time Magazine' Editor Michael Elliot said, "Strong Euro is affecting negatively not just Greece, but also countries like France and Germany in Europe. There are housing bubbles now in Europe as well as in UK and Spain. That is another threat for the global growth."

Hungarian Prime Minister Ferenc Gyurcsany said policy makers would require new instruments to face the threat in the US economy, besides depending on growth in India and China.

The unscheduled rate cut by US Federal Reserve was the hottest topic during the first briefing as well as the welcome reception on Tuesday evening.

The US central bank had on Tuesday cut key rates by 75 basis points to avoid recession in the domestic economy.

The monetary policy review in the States is due later this month.

A global survey of chief executives by PwC released at Davos also suggested that the business confidence has slumped in developed economies like the US and many European countries.

At the same time, CEOs in nations such as Russia, India and China are confident that their companies would grow.

Giving a different view, Morgan Stanley's Asia Chairman Stephen S Roach cautioned global business and political leaders, who have gathered here for the five-day meet, saying that growth in India and China would not be able to compensate for a slowdown in the US due to the sheer size of world's largest economy.

"Even if five per cent of US consumption is out, we would be moving toward the mother of all recessions," he said, adding that housing bubble in the US would have far-reaching consequences for the global economy.

He said the consumption constituted as much as 72 percent of the US GDP in 2007, estimated at 9.5 trillion dollars.

Referring to food prices, Nath said the US decision to move toward bio-fuel because of rising crude oil prices had adversely affected the food supply in the global market. - DDNEWS