Nouriel Roubini sees downside risk to economy in H2 CY10
Published on Wed, Mar 17, 2010 at 12:35 | Source : CNBC-TV18
Updated at Wed, Mar 17, 2010 at 14:38
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Nouriel Roubini sees downside risk to economy in H2 CY10
A skeptic Nouriel Roubini, Chairman of RGEMonitor.com sees a downside risk to the economy in the second half of calendar year 2010 when the fiscal stimulus is going to fade away.
The economy has been zooming on the path of recovery. While few market experts believe that the global economic crisis seems to be a story of the past, a few others hold a sign of caution.
The Indian markets, after going through a state of numbness for six straight sessions, saw some relief on Tuesday as the indices climbed up a bit. However, the surge has not been steep leaving very little room for cheer.
A skeptic Nouriel Roubini, Chairman of RGEMonitor.com sees a downside risk to the economy in the second half of calendar year 2010 when the fiscal stimulus is going to fade away. "You avoided a free fall and that's why risk aversion has reduced and there is a recovery of the economy. But in spite of this policy stimulus, the economy today should be growing at 6-7% rate. In stead of that we are debating if it will grow at 2.5% or 3%. Once the policy stimulus goes away, we will have to see if there is enough robustness in private demand to have a sustained economic recovery."
"When the stimulus is gone, there will be a massive slowdown of growth. We are running out of steam. On the cost cutting and topline revenue, we are not going to recover and there will be more losses to the financial system then currently priced to the market. So I see more volatility ahead of us," he said.
Further, Roubini sees major uncertainty over the exit strategy. "An early exit can lead into recession and deflation and a late one may result in credit rink and high inflation. Also there may be a risk of a major policy mistake during the elections in the US or the UK and other countries."
