Mumbai: Losses from
the US subprime mortgage crisis will total $100 billion to $150 billion, but the
defaults are unlikely to peak until 2009, David Wyss, chief economist at international
rating agency Standard and Poor''s, said.
problems are not over. We think in the United States, the housing market is not
going to bottom until winter. We think the losses in these sectors won''t really
hit their peak until 2009," he told a news conference in Mumbai.
US sub-prime housing crisis will not peak until 2009 and total defaults could
reach $150 billion, but robust emerging markets would help keep global growth
strong, he said.
starts are going to drop further, the unemployment rate is going to tick up further,
we are expecting another year of sluggish US economic growth," Wyss said.
"We are not halfway through with this crisis yet," he added.
expected the world economy to grow 3.6 per cent in 2007 and 3.5 per cent in 2008.
The US economy would grow at 2 per cent in both years, down from 2.9 per cent
growth remains strong despite the weaknesses seen in the US economy - especially
in emerging markets because of healthy domestic demand conditions and export strength
to non-US market," S&P said in a report released in Mumbai.
fact that the US slowdown is concentrated in housing, which has relatively low
import content, helps," it said.
markets were far less vulnerable to credit market turmoil than during previous
crises because of the capital flows attracted by high economic growth coupled
with improved corporate governance standards, S&P said.
high commodity prices were also helping many emerging market economies, such as
Latin American and African countries that are major exporters.
estimated that, on a purchasing-power parity basis, the United States would contribute
only 9 per cent of world growth in 2007, compared to China''s 33 per cent and India''s
12 per cent.
was the major weakness in the US economy and the subprime crisis - which roiled
global markets in late July and August - was far from over, although its shock
value was wearing off, the S&P chief economist said.
expected the US trade deficit to shrink in coming months as stronger overseas
growth and a weaker dollar would make US exports more competitive.