Roubini says bottom of U.S. recession not here yet
SEOUL, May 27 - Economist Nouriel Roubini on Wednesday said the end of the global recession is likely to occur at the end of the year rather than the middle, and that U.S. growth will remain below potential afterwards.
"We are not yet at the bottom of the U.S. and the global recession," said Roubini. "The contraction is still occurring and the recession is going to be over more toward the end of the year rather than in the middle of the year."
"There is still too much optimism that a recovery is just around the corner," said Roubini, a professor at New York University's Stern School of Business and chairman of RGE Monitor, an independent economic research firm.
Roubini, who is widely credited for predicting the current economic turmoil, was speaking at the Seoul Digital Forum.
"A more sober analysis suggests we're closer to the bottom; there is light at the end of the tunnel, but it's going to take a while longer, and the recovery is going to be weaker than otherwise expected."
Once the recession ends, "U.S. economic growth is going to be below potential for at least two years," he said, amid multiple imbalances in the housing sector and the financial system, and the rise of public debt.
Roubini said the outlook for Asia was more positive than for Europe, Japan and the United States, thanks to stronger fundamentals.
"The latest economic indicators from Korea ... suggest there is the beginning of an economic recovery, and growth might be already positive in the second quarter."
The downside risk, Roubini said, was if advanced countries did not recover fast enough and if China's rate of growth started to slow again.
Roubini predicted China would post a 6 percent growth rate this year, a "hard landing" considering it grew by 10 percent for a decade.
A robust recovery in Korean, China and other countries in the region would depend upon relying less on external demand and export-led growth and relying more on domestic growth, he said.
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Roubini recommends Chinese model for North Korea: Economist Roubini says North Korea should follow economic models of China, Vietnam
SEOUL, South Korea (AP) -- Impoverished North Korea can liberalize its economy while maintaining its political system if it follows the path taken by China and Vietnam, prominent economist Nouriel Roubini said Wednesday.
"I think the lesson is that progressive economic opening and liberalization even in a formerly centrally controlled economy can lead to beneficial changes," Roubini told reporters on the sidelines of a technology forum.
Roubini, a professor at New York University, is one of the few experts to have predicted the global financial crisis.
China and Vietnam have aggressively opened their economies to foreign investment in recent decades, resulting in rapid growth and rising living standards even as their ruling communist regimes have remained in place.
North Korea's economy, meanwhile, has lagged far behind. The collapse of the Soviet Union in the early 1990s deprived it of a key source of aid and trade. Subsequent economic mismanagement, severe flooding, a famine and a standoff with the international community over its nuclear development have also contributed to its decline.
Roubini said that the Chinese model shows how a formerly centrally planned economy can liberalize without major political changes and economic openness does not "have to be a threat." If a government provides jobs and income growth "your regime can stay stable in power for a long time" and "economic liberalization can be beneficial for a country," he said.
Roubini called the success of China, Vietnam and other countries in the region a testimony to that view.
"But I'm not sure (North Korea) would listen to such a message or not," he said, describing as "perverse" the relationship between its economy and "more aggressive external behavior."
North Korea in recent months has assumed an increasingly strident tone in its external relations. The country said Monday it carried out its second underground nuclear test in less than years, a move that had drawn widespread international condemnation.
On the global economy, Roubini said that the U.S. is likely to emerge from recession toward the end of this year, rather than the middle as some expect, and will probably only manage growth of about one percent for a year or two, below its potential of three percent.
"I think there is too much optimism that the recovery is just around the corner," he said in a keynote speech at the opening of the annual Seoul Digital Forum. "A more sober analysis of the data suggests we're closer to the bottom, there is light at the end of the tunnel, but it's gonna take a while longer and the recovery's gonna be weaker than otherwise."
Regarding prospects for China's economy, Roubini said he expects it to slow to growth of 6 percent this year, which he added is "effectively a hard landing" for an economy that needs to expand closer to 10 percent to support job creation for the country's rural poor migrating to cities.
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