The risk that the US economy slips into recession has climbed but is still not that high, a top White House economic advisor said on Tuesday. "Obviously, the chances of a recession are higher now than they were a year ago, but we still think it's less than 50:50," Allan Hubbard, economic advisor to US President George W. Bush, told CNBC television during an interview.
"I don't know what it is, but the bulk of the economy is doing just fine. We obviously have problems in the housing sector and we have problems in the financial sector, but ... real America is doing just fine," he said.
"Foreclosures are going to increase. We expect that, with all these subprime mortgages. At the same time, it is a small percentage of our overall economy. We've got a gigantic economy," he said.
A collapse in the US market for subprime mortgages has spurred a global financial credit crunch, inflicting painful losses on many big international banks and unnerving investors who fear the world's largest economy risks a bad crash.
Hubbard said that plans by Citigroup Inc, the largest US bank, to sell a stake to the Abu Dhabi Investment Authority for $7.5 billion was an endorsement of the United States as a destination for investment.
"I think what is important about that investment is that it reinforces the fact that America is great place to invest. That is why foreigners want to invest here," he said. Some analysts have said that the weaker dollar, which has plumbed record lows against the euro as growth worries mount, has exposed the country's top firms to foreign take-over.
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