‘Perfect Storm’ Coming for Global Economy in 2013: Roubini
Weakening economic conditions will come together in 2013 and create a “perfect storm” of global weakness, economist Nouriel Roubini told CNBC.
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Weakening economic conditions will come together in 2013 and create a “perfect storm” of global weakness, economist Nouriel Roubini told CNBC.
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Weakening economic conditions will come together in 2013 and create a “perfect storm” of global weakness, economist Nouriel Roubini told CNBC.
CNBC
06 July 2011
Known for his generally dour outlook that helped him see the financial crisis before it hit in 2008, Roubini said the US, European nations and others have become adept enough at forestalling their problems that a true crisis won’t hit until 2013.
But when it does, the effects are likely to be painful.
“My prediction for the perfect storm is not this year or next year but 2013, because everybody is kicking the can down the road,” he said in a live interview. “We now have a problem in the US after the election if we don’t resolve our fiscal problems. China is overheating...eventually it’s going to have a hard landing.”
In the nearer term, Roubini sees slow but steady growth in the US, with gross domestic product likely to be a bit above 2 percent, with unemployment and housing continuing to hold back the economy.
From there, recovery will be difficult as the government cuts spending and raises taxes to ease pressure from the bulging debt and deficit issues.
At the same time, euro zone periphery nations like Greece, Portugal and Spain will continue to wrestle with their own debt problems, and China will act to prevent inflation from getting out of control.
Then the storm hits, he said.
“I see every economy in the world trying to push their problems to the future,” he said. “We start with private debt, public debt, supra-national debt—we’re kicking the can down the road and eventually this is going to come to a head in 2013.”
China’s efforts to pull inflation back to the 5 or 6 percent range also will constrain growth and hit its trading partners, said Roubini, head of Roubini Global Economics.
“That implies lower commodities, lower exports from Europe to China, weaker global economic growth and a situation in which all advanced economies have weak economic growth,” he said.
Roubini refrained from any specific predictions about GDP or stock market levels, but said the damage will be widespread.
“If we don’t have enough job creation there’s not enough labor income. Therefore, there’s not enough consumption and consumer companies are going to be depressed. Therefore, the recovery is going to remain weak,” he said. “The markets are expecting now a robust recovery in the second half of the year. I think the recovery is going to disappoint on the downside.”