Accentuating the positives

Looking at the economic prospects for the world, Dr. Nouriel Roubini, professor of economics at New York University’s Stern School of Business, foresaw a mixed future, with both pluses and minuses in store for the global economy.

Roubini identified a series of positive effects that would drive the world economies and said that these would make headway against some counter-positive trends.

The first positive identified by Roubini was the fact that the recovery has lasted three years to date and looks to be well-founded in Europe, the US, Japan and the emerging economies.

Second, he observed that “the tail-risks, such as double-dipping, are definitely smaller and lower now than they were a year or so ago”. Third is the fact that “corporates round the world appear to be in good shape. They have emerged from the low point leaner and meaner, and have cash available that they are more willing to spend.”

Roubini’s fourth positive pointer was the continuing strong rise of the emerging economies.

“The permanent fast growth of these economies is also good news for real estate,” he said.
And then there is the fact that the financial markets are starting to rise round the world — and the equity markets are also experiencing a positive rally.

Encouragement should be drawn from these indicators, Roubini said. However, he also identified a series of factors that are working against these positives: “Recovery is still slow and precarious in many places. It is a U-shaped recovery not a V-shaped bounce-back.”

Sovereign risk is still high, and there are large public deficits, Roubini pointed out, adding: “Governments need to tackle these deficits with conviction.”

The persistent problems in the periphery of the euro zone are also a cause for concern.

“Though the break-up of the euro now seems unlikely, the troubles in Greece, Spain, Ireland, Italy and Portugal mean that even when they get back on the road to recovery, they will have lost market share to the emerging economies.”

The fourth troubling factor is the continued problems in the US. Chief among these is the country’s inability to tackle its endemic fiscal problems, Roubini said. The housing sector has double dipped and unemployment remains at a high level.

Roubini also stressed the as-yet unknown run-on effects flowing from the troubles in the Middle East.

But despite these problems, Roubini was hopeful that the positives would continue to outweigh the counter-positives.

This article was taken from MIPIM Review 2011. Read more here.

Top image credit : Photobank gallery

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