Ever since Nouriel Roubini predicted the credit crisis, everyone turned to the NYU professor for his assessment of the ongoing economic risks.
And for years, Roubini’s words were often gloomy and sometimes outright doomy. He frequently used frightening imagery like “perfect storms” to describe what would happen when various likely risks would collide.
However, his outlook for 2014 is far from doom and all-out gloom. From his new piece in Project Syndicate:
The good news is that economic performance will pick up modestly in both advanced economies and emerging markets. The advanced economies, benefiting from a half-decade of painful private-sector deleveraging (households, banks, and non-financial firms), a smaller fiscal drag (with the exception of Japan), and maintenance of accommodative monetary policies, will grow at an annual pace closer to 1.9%.
Moreover, so-called tail risks (low-probability, high-impact shocks) will be less salient in 2014. The threat, for example, of a eurozone implosion, another government shutdown or debt-ceiling fight in the United States, a hard landing in China, or a war between Israel and Iran over nuclear proliferation, will be far more subdued.
But don’t confuse this lack of doom with outright bullishness. Roubini believes that the world economy will continue to grow at a less-than-stellar pace. And he continues to be concerned about long-term bearish themes.
“Indeed, there is a looming risk of secular stagnation in many advanced economies, owing to the adverse effect on productivity growth of years of underinvestment in human and physical capital,” he said. “And the structural reforms that these economies need to boost their potential growth will be implemented too slowly.”
His piece goes into each of the major economies.
Interestingly, he believes the U.S., which was ground-zero for the financial crisis, could be the big outperformer in the new year.
“In sum, the global economy will grow faster in 2014, while tail risks will be lower,” he said. “But, with the possible exception of the US, growth will remain anemic in most advanced economies, and emerging-market fragility — including China’s uncertain efforts at economic rebalancing — could become a drag on global growth in subsequent years.”
Overall, his outlook is much closer to the consensus than usual. In other words, this is probably the most optimistic we’ve seen Roubini in years.
Read the whole piece at Project Syndicate.
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