Willem Buiter, chief economist at Citi and former Bank of England policymaker, warns China’s woes are set to spread
A “hard landing” for China is likely to plunge the world economy into recession in the next two years, Willem Buiter, chief global economist at Citigroup and a former Bank of England policymaker, has said.
As the Federal Reserve in Washington prepares to decide whether to defy warnings of economic fragility and push up interest rates next week, a research note by Citi’s experts warns of a 55% probability of global recession.
They expect the downturn to be driven by waning demand from the fragile Chinese economy, which Citi believes is heading for a crash.
A global recession is usually defined by economists as an extended period of below-capacity growth. Citi puts global potential growth at 3%, but expects growth to “reach or fall below 2%” before bottoming out in 2017.
“We believe that a moderate global recession scenario has become the most likely global macroeconomic scenario for the next two years or so,” Buiter says.
Few other economists are predicting a global recession, and the mood among investors has calmed since August’s chaotic trading, when growing evidence of China’s slowdown sent shockwaves through the world’s financial markets.
But Buiter says: “Economists seldom call recessions, downturns, recoveries or periods of booms unless they are staring them in the face. We believe this may be one of those times.”
Full article: Global recession in next two years is ‘most likely’ scenario, says economist (The Guardian)