`World Economy Could Stay Sluggish for 5-10 Years`

Nobel Prize-winning economist Paul Krugman warned yesterday that the depressed world economy might continue over the next five or 10 years in a situation worse than Japan’s "Lost Decade."

The Lost Decade refers to Japan`s recession of the 1990s, when the world`s second-largest economy saw little or no growth over 10 years and the bursting of its asset price bubble.

At a conference on the world economy and finance at Seoul’s Grand Hyatt Hotel, Krugman said the worst might be over but talking about a genuine recovery is premature.

Saying demand continues to be lacking, he said export-driven measures will not lift the Korean economy out of the crisis unless goods are exported "to other planets."

He agreed, however, that the pace of economic decline is slowing and that the worst is over with the global economy entering a stabilization phase. The global economy has just been released from an intensive care unit but full recovery will take more time, he added.

On when the global economy will start to pick up, he said the labor market will continue to stay sluggish until 2011 though the recession will end in September with industrial output recovering. “The global economy could decline until 2013 or 2014,” he said.

peacechaos@donga.com