Pessimists Soften Bearish Forecasts for World Economy

With key indicators improving in many economies worldwide, many experts are indicating the worst for the world economy might be over. Even the most hardened pessimists have softened their bearish forecasts.

Still, many say more effort and time are needed to turn expectations of global economic recovery into reality.

○ Forecasts of the top four pessimists

Nouriel Roubini, an economics professor at New York University, is known as “Dr. Doom” due to his pessimism over the global economy. At the Seoul Digital Forum in Seoul yesterday, he said, “There is light at the end of the tunnel. The end of the U.S. recession is likely to come at the end of the year.”

“Though there’s still a long way to go, governments have announced appropriate policies. Asian economies have shown strong recovery due to a small amount of fiscal deficit and household and financial institution debt.”

Roubini said, however, that the pace of economic growth will slow down even after recovery. He had long argued that the U.S. economy would suffer from a bubble in the housing market, a sluggish mortgage market and plummeting consumer confidence since 2006, when the economy was in good shape.

Over in the United Arab Emirates, Paul Krugman of Princeton University told a seminar, “The world economy has avoided utter catastrophe. Industrial production could start to grow in two months.”

Krugman, who won last year’s Nobel Prize in economics and is a columnist for the New York Times, has repeatedly warned of a global recession comparable to the one Japan experienced in the 1990s.

Yale University professor Robert J. Shiller and former Wall Street investment strategist Marc Faber, who is also known as a pessimist, have recently recommended buying properties and invest in stocks again.

○ Slow recovery

Why have pessimistic economists shifted their views? Min Sang-gi, a business management professor at Seoul National University, said “Groundless fear has vanished into thin air as U.S financial institutions have survived longer than expected and their stock prices have kept growing.”

Indexes reflecting consumer and producer confidence have also significantly improved. Korea Investment & Securities researcher Kim Hak-gyun said, “The U.S. housing market, which created the global economic crisis, has not begun recovering yet. But respondents to surveys on economic forecasts have given positive answers.”

Other economists, however, remain bearish on the global economy over the mid to long term. They say the world economy will not return to its pre-crisis level even if the U.S. economic slowdown stops because soaring U.S. unemployment will block robust consumption growth.

At the Seoul Digital Forum, Song Hongbing, the author of “Currency Wars” and the dean of the Academy of Global Finance and Economy in China, said, “The U.S. will suffer a recession comparable to Japan’s in the 1990s since U.S. unemployment has kept growing and the number of its baby boomers, who account for a large share of consumers, will peak this year.”

mint4a@donga.com