A combination of the US-China trade standoff and a potential spike in oil prices could sink the global economy into a recession in 2020 if geopolitical tensions continue to escalate, according to renowned economist Nouriel Roubini.
The global economy grew at 2.6 percent in the last quarter, according to the World Bank which expects it to grow at 2.7 percent in 2020.
Roubini became famous for predicting the 2008 global financial crisis even though his dreary forecasts then earned him the sobriquet “Dr. Doom”. He, however, likes to call himself a realist.
In an interview with Bloomberg TV, Roubini has said it is “a scary time for the global economy” even though the sentiment in stock markets does not reflect it.
What’s worse, he said, is that markets’ expectation that central banks would step in to support the global economy may not materialize as they lack conventional options such as cutting interest rates – given that they are already near zero in several countries. Further, the high levels of debt in many developed countries could pose a problem, he added.
Central banks will have to resort to “unconventional” policies, hinting at the need to adopt radical moves such as putting money directly into the hands of people – a move described dramatically in economic literature as dropping money from helicopters.
Roubini also had a dire warning on how the US-China trade war would pan out, saying that the world was in a “deglobalization” phase and that negotiations between the two countries would collapse.
“This divorce is going to get ugly compared to the divorce between the U.S. and the Soviet Union,” he said, adding that other countries would have to choose whom they want to align with.
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