Logo of the World Economic Forum. The
annual Davos gathering of the world's political and business elite opens
Wednesday with the already gloomy atmosphere further soured by near-panic
conditions on world stock markets.(Xinhua/AFP Photo)
DAVOS, Switzerland, Jan. 23 (Xinhua) -- The U.S.
economy, troubled by the financial turmoil, is all but certain to fall into
recession, which could spill over to the whole world, economists warned at the
World Economic Forum on Wednesday.
Nouriel Roubini, professor and chairman of Roubini
Global Economics of the United States, told a six-person panel on the world
economy in 2008 that the debate now was not whether the U.S. will fall into
recession, but how severe it will be.
The warning came one day after the U.S. Federal
Reserve suddenly slashed its interest rate by 75 basis points to 3.5 percent
overnight, a move designed to help ease market nerves and salvage the world's
biggest economy from recession.
"The Fed cannot prevent the (U.S.) economy going into
recession," Roubini said, "My view is that world economy cannot decouple from a
U.S. hard landing."
Roubini predicted a deep and prolonged decline,
perhaps lasting as long as a year.
"The point is not about a soft or hard landing, but
how hard the hard landing is going to be," he said, "I believe we are going to
have a severe (U.S.) recession lasting for four quarters."
A major downturn in the U.S. will inevitably result in a severe slowdown in economic growth in the rest of the world, Roubini said, while ruling out an outright recession on the global scale.
U.S. Secretary of State Condoleezza Rice speaks at the World Economic Forum (WEF) Annual Meeting in Davos, Switzerland, Jan. 23, 2008. Some 2,500 people, including business and political leaders as well as heads of internatioal organizations, are gathering at this famous Alpine ski resort for the five-day forum which opened on Wednesday. (Xinhua Photo)
Stephen Roach, chairman of Morgan Stanley's Asia
division, said he stands "shoulder to shoulder" with Roubini's pessimistic
"I think it's going to be a fairly painful and
relatively lengthy recessionary period," he said, referring to the troubled U.S.
Like Roubini, Roach predicted a prolonged global
slowdown, not a recession, stressing a decoupling from the U.S. is only a
Concerning Europe, another economic power severely
hit by financial turmoil, Roach said it was not going to get special
dispensation from a global economic slowdown, predicting the European Central
Bank is likely to follow the step of the U.S. Federal Reserve to cut interest
rate in the short term.
However, Roach criticized the U.S. Federal Reserve's
decision of interest rate cut as "reckless" and "dangerous."
It "could create another (asset price) bubble-induced
recovery" which was "the last thing the world and U.S. needs," Roach said.
Roubini said the Fed's recent easing, while
necessary, comes too late to do more than make the recession "slightly more
shallow and less protracted" than otherwise, due to the exhausted finances of
U.S. consumers and a severely stressed banking system.
In contrast to Roubini and Roach, the Indian Commerce
and Industry Minister Kamal Nath appeared more optimistic, arguing the growth of
trade between developing countries could cushion the effect of a U.S. slowdown.
If the U.S. does slip into a recession, "this is the
first time the world is looking at a recession with two engines of growth --
China and India," Nath said.
He said India's growth, in particular, is largely
being driven by domestic demand, making the emerging economy more resilient to
any U.S. fallout.
As to China, the threat of a U.S. recession would
pose a particularly difficult policy challenge, according to Yu Yongding, a
member of the Chinese Academy of Social Sciences and a former member of the
monetary policy committee at the People's Bank of China.
"A serious slowdown in the U.S. economy will have
quite a serious impact on the Chinese economy," he said.
However, Yu said China's growth could help it weather any slowdown.
Klaus Schwab, founder of the World Economic Forum, attends the World Economic Forum (WEF) Annual Meeting in Davos, Switzerland, Jan. 23, 2008. Some 2,500 people, including business and political leaders as well as heads of internatioal organizations, are gathering at this famous Alpine ski resort for the five-day forum which opened on Wednesday. (Xinhua Photo)
In face of a weak U.S. economy and financial turmoil,
world business leaders appeared less confident of economic prospects.
According to a global survey conducted by the New
York-based consulting firm Pricewaterhouse Coopers, confidence among leaders of
the world's top companies has fallen for the first time in five years, with half
of them "very confident" about revenue growth over the next 12 months, down from
52 percent in the previous year.
The survey, which was based on 1,150 interviews with
CEOs in 50 countries from October to December, showed a divided world, where the
confidence drop was more obvious in the U.S. and Western Europe, but in contrast
CEOs in the rising economies of Asia, Latin America and Central and Eastern
Europe were getting more optimistic.
Rice: U.S. economy to continue drive
U.S. Secretary of State Condoleezza Rice
sits on stage following her key-note speech at the World Economic Forum
WEF in the Swiss Alpine resort town of Davos Jan. 23, 2008.(Xinhua/Reuters
DAVOS, Switzerland, Jan. 23 (Xinhua) -- The U.S. economy
will remain a leading engine of global economic growth despite concerns about a
possible U.S. recession this year, U.S. Secretary of State Condoleezza Rice said
here on Wednesday.
"The U.S. economy is resilient, its structure is sound,
and its long-term economic fundamentals are healthy," Rice told a plenary of the
World Economic Forum annual meeting, which opened on Wednesday with the
participation of world political and business leaders. Full story