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Experts Confident Of Local Economic Recovery

BBVA’s economic experts here and abroad predict sustained global economic surge


November 6, 2003
Copyright © 2003 CARIBBEAN BUSINESS. All Rights Reserved.

Local, stateside, and European economic experts offered glowing prospects for an already recovering Puerto Rico economy in exclusive CARIBBEAN BUSINESS interviews before the BBVA-sponsored "Puerto Rico Perspectives 2003-05" economic conference yesterday at the Caribe Hilton.

Juan Lara, principal economist at local firm Estudios Tecnicos and a consultant to the Spanish bank, forecast economic stabilization and moderate growth of 2.5% to 3.5% for Puerto Rico in 2004. "The strength and timing of the economic recovery at the local level will hinge primarily on the intensity of investments in public works," he said.

Lara added that the strengthening of the U.S. mainland economy will continue to work in Puerto Rico’s favor. He noted that auto and retail sales indicate consumer confidence. Other positives for the island are the low interest rates, stable oil prices, and the local labor market.

"The economy is setting itself up and the stock market will be ready to lead the recovery path toward a new economic environment," said Eduardo Colon, president of BBVA Capital Markets.

Andrew Gray III, director of research at Pershing LLC, predicted that the U.S. gross domestic product will grow 3% in 2003 and 4% in 2004. "My opinion is that the economic environment will have improved noticeably by the coming presidential elections," he said.

Gray underscored the stock market’s central role in the recovery, with companies in the information technology, healthcare, financial services, leisure time, and natural resources sectors leading the way. "A strong year is expected from the equity market side as we start reconciling our economic sectors. Fixed-income investments will do well thanks to continued low interests rates," he said.

Gray also touched on trends to watch through 2005, among them an economy driven by the Internet, additional productivity gains, potential for wider profit margins, increased competition, and the aging of the global population.

Sponsored by BBVA Puerto Rico, the conference offered the bank’s clients a view of the expected behavior of the economies of Puerto Rico, the U.S. mainland, and Europe in the next few years.

"It has been difficult to understand the ups and downs of the current economic recovery. There have been many shocks, but will the one we are in now be the last one?" wondered David Treguas, subdirector of research services at BBVA Spain, in reference to the slow-moving economic recovery. He spoke to CARIBBEAN BUSINESS from Madrid.

Leading indicators in the U.S. and elsewhere have shown a considerable uptick in economic activity in the past few months. The economies of Europe and Asia are also starting to send positive signals.

Treguas said that once investments by businesses start rolling again, there will be more tolerance to risk, financing conditions will improve, and the stock market will rise. He added that the relative depreciation of the U.S. dollar is helping to boost U.S. exports, which in turn will help close the trade gap and the U.S. current-account deficit.

Treguas cautioned, however, that regardless of investments, the U.S. economy will still be called on to lead the global recovery. "The Federal Reserve board can influence the recovery trend through its monetary policy. Even though interest [rates] will probably stay the same through the [2004] elections, there is a notion that they can still go down in the U.S.," he said.

This Caribbean Business article appears courtesy of Casiano Communications.
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