The world economy will remain in recession until the end of 2009 even though the worst of the global financial crisis has passed, the celebrated US academic known as “Dr Doom” says.
Professor Nouriel Roubini, New York University Stern School of Business professor of economics and international business, told the Diggers and Dealers mining conference in Kalgoorlie, Western Australia, he is bearish on the outlook in the short term.
“Certainly, we’re closer to the bottom than six months ago,” Prof Roubini said as he delivered the keynote address on the first day of the three-day annual gathering of mining and resources industry companies and executives.
“The worst of the global financial crisis is behind us but I don’t believe the recession is yet over at the global level,” he said.
“We’re still in a recession and it is going to continue until the end of the year.
“I’m bearish in the short-term.
“This year, we might … see global economic growth of negative two per cent. Next year, global economic growth might be around 2.3 per cent.”
Prof Roubini – who in 2006 predicted the onset of the global financial crisis – said there was light at the end of the tunnel in emerging market economies “and even in advanced economies there is a bottoming out”.
Australia’s resources-based economy would grow by two per cent in 2009/10 as China continued to stockpile commodities, while the United States should grow by one per cent as it struggled with a severely damaged financial system and weak labour markets.
“Even with the White House expecting four per cent growth, US public debt is going to double,” Prof Roubini told delegates.
“The recovery of Australia is going to be more robust.
“Financial institutions in Australia are better than others.
“(But) there is more scope for fiscal stimulus.”
Prof Roubini also predicted commodity prices would continue to rise in the medium term.
But he warned there was risk a US recovery could be short lived if stimulus measures there are truncated too soon.
“There is some looming risk coming down the line from unsustainable fiscal deficits and monetisation of them, and those risks might lead to a double-dip recession that might start sometime in the second half of next year or some time in 2011,” he said.
In September 20006, Prof Roubini told the International Monetary Fund a crisis was growing in the economy and financial markets, and warned the US was facing a housing market bust.
He earned the nickname Dr Doom in 2004 for his dire economic forecasts.