Wall Street analysts discouraged market participants with dismal forecasts for the year ahead. Top American economist Nouriel Roubini also acted as Dr. Doom. His forecast deserves due consideration. Earlier, he won professional recognition because of his accurate prediction of the global economic crisis of 2008.
In an interview with the Financial Times, the expert painted a gloomy picture of the global economy in 2023. "I think that really the world is on a slow-motion train wreck. There are major new threats that did not exist before, and they're building up and we're doing very little about it," Nouriel Roubini said. He is certain that a convergence of old and new challenges poses risks to the world. He also warns that the world is on the verge of a profound and protracted recession. The expert takes the common viewpoint about a shallow and short-lived economic crisis with a pinch of salt. "The conventional wisdom, coming from policymakers or Wall Street, has been systematically wrong,” he pointed out.
“The Fed, ECB, Wall Street, the City say, yeah, we’re going to have a soft landing. In US monetary history for the last 60 years, we’ve never had an episode where inflation is above 5 [per cent] — today it’s 7.1 — and unemployment is below 5 [per cent] — and right now it’s 3.7 — that when you raise rates to fight inflation, you get a soft landing. You always get a hard landing,” he expanded on different economic conditions, preceding the precious crisis and the looming one.
On top of that, the crisis will be exacerbated due to the huge global public and private debt which has swollen from 220% of global GDP in 1999 to 350% in 2019, the economist lamented. For this reason, central banks will not have enough leverage to raise rates to the levels appropriate to fight against the economic slowdown.
