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Friday, 16 January 2009

US downturn may end late '09

TOKYO - THE US economy will begin to rebound by the middle of the year and a recovery can be expected by 2010, the head of a top American business lobby said on Thursday.

'By the middle of this year, we will be bouncing off the bottom,' Thomas Donohue, president and chief executive of the US Chamber of Commerce, told The Associated Press.

'We will show some success there but then really start getting our feet under us in 2010,' he said, as pent up demand and investment start to pick up.

But Mr Donohue acknowledged the US economy was still in trouble although stability is gradually returning.

The US economy likely contracted 5 per cent during the last quarter of last year, and the first quarter of this year will show another 3 per cent drop, he told The Associated Press in an interview at a Tokyo hotel.

To achieve full recovery, both the US and Japan must guard against protectionism and strengthen the global trading system, he said.

Mr Donohue's visit to Japan is part of a trip to Asia, which also included China and South Korea, to meet political and business leaders and exchange ideas on the global recession, the fight against protectionism and efforts to boost world trade.

Mr Donohue expressed confidence that President-elect Barack Obama would not allow protectionism to grow despite pressure from Congress and labor groups, and that he saw great potential for American businesses to invest in the service, financial and pharmaceutical sectors in Japan.

Mr Donohue stressed the importance of Asia for global growth, noting that half of the world's economy has shifted to the Asia-Pacific region.

'The global economy can't fully recover until the United States and Japan do,' he said.

Speaking about the troubled US auto industry, Mr Donohue said a merger between General Motors Corp. and Chrysler LLC was a good idea.

Despite the US$4 billion (S$5.98 billion) loan Chrysler recently received from the federal government, analysts say the automaker will have a tough time turning itself around as an independent company.

The two automakers were in discussions late last year about a possible GM acquisition of Chrysler.

'We think that was a productive discussion,' said Mr Donohue.

'Those conversations are still going on, in my opinion.' -- AP

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