Global recession in next two years is ‘most likely’ scenario, says economist

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)

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