Developed economies are facing years of anemic growth and the risk of renewed recession as their citizens grapple with sluggish employment and highly indebted governments, said American economist Nouriel Roubini at a seminar in Sao Paulo on Monday.
The eurozone debt crisis has hit financial markets in recent weeks, as investors fear that the austerity measures dictated by the European Union and International Monetary Fund (IMF) plan worth $1 trillion could stifle already weak global growth, Reuters reported. In contrast, some emerging markets are at risk of overheating and show symptoms of potential real estate price inflation. "Labor market conditions will remain very weak in some advanced economies," Roubini, known as "Dr. Doom" for accurately predicting the last financial crisis in the U.S., said. "Savings will have to grow faster than consumption in the coming years. Therefore, growth will remain anemic," Roubini told seminar participants in Sao Paulo, who leads his own consulting firm RGE Monitor (Roubini Global Economics Monitor).
The global economy struggled with the credit crisis of 2008-2009, and investors fear that the fiscal crisis in the eurozone could jeopardize growth in developed economies, which have only recently begun to recover. Fears for the financial health of the eurozone intensified last week after the rating agency Fitch Ratings downgraded Spain’s credit rating by one notch to AA-plus, indicating that the crisis surrounding Greece’s debt is spreading to other euro countries. Given that the Spanish economy is far larger than Greece’s, a crisis there would have far more serious consequences for the 16 eurozone countries and global growth. Greece, Spain, Portugal, and Ireland will face serious competitiveness issues that could jeopardize their recovery, Roubini warned. (H)
