Despite rising downside risks, the chances of a double-dip recession hitting the US or the global economy are slim, analysts said yesterday.
“The latest economic indicators in the US and the recent proceedings in the eurozone’s debt crisis show that the probability of a double-dip recession hitting the global economy is declining,” Liang Kuo-yuan (梁國源), president of Taipei-based Polaris Research Institute (寶華綜合經濟研究院), said during a conference held by Taiwan Academy of Banking and Finance (TABF, 台灣金融研訓院).
Although the US economy is facing headwinds, such as lingering high unemployment and a weak housing market, the current situation is better than during the 2008 global financial crisis because the US financial market does not have the same systemic risks, Liang said.
The US economy might only be in for a mid-cycle pause — which means growth momentum would slow, but the economy would not post continued declines — instead of a double-dip recession, he added.
Du Ying-tzyong (杜英宗), a vice chairman at Nan Shan Life Insurance Co (南山人壽), put the probability of a double-dip recession striking the global economy at 15 percent.
“Since most of the research institutes still forecast 2 percent economic growth next year in US, one of the most important economies in the world, we should not panic, even with the recent market volatility, which has been a roller coaster,” Du said.
INFLATION
Du said he was more worried about inflation than a double-dip recession at the moment because inflationary pressures could rise anytime because of increasing demand for raw materials from large emerging markets such as China and India.
However, TABF chairman Shea Jia-dong (許嘉棟) said he did not foresee a positive global outlook because solving current economic troubles would be far harder than the scenario in 2008.
“It was the cooperation among major economies that helped quickly solve the financial tsunami in 2008, but the fundamentals are different now,” Shea said
He said some countries now lack the financial capability to deal with the current problems, while others are devoid of new and effective ideas.
To manage these rising downside risks, Taiwan should focus more on deepening intra-regional trade and promoting its tourism sector to enhance domestic demand, Chung-Hua Institution for Economic Research (中華經濟研究院) president Wu Chung-shu (吳中書) said.
The government should also guard against the slowing global economy’s negative impact on exports by encouraging companies to invest in Taiwan, where liquidity remains abundant, Wu said.
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