|English.news.cn 2011-12-25 11:18:24|
WASHINGTON, Dec. 24, (Xinhua) -- Economic outlook for 2012 could be dimmer with growth pace subdued by European debt woes, feeble U.S. recovery and slowdown in emerging markets, a renowned economist of a leading American thinktank said.
Uri Dadush, director of International Economics Program at the Carnegie Endowment for International Peace, told Xinhua in a recent interview that "this year is disappointing, but not a disaster."
The former World Bank director of international trade then cautioned about the deeper gloom threatening the performance of 2012, saying that the outlook for next year is at best a slower global economy than we saw this year.
According to him, the best scenario for next year would be a slower growth due to great uncertainties, including evolution of European debt crisis and its spillover effects, still feeble recovery in the U.S., as well as slowdown in emerging countries in their course of structural reform.
The conditions "could be quite a lot worse," Dadush warned.
He noted that the emerging markets would feel the pressure from poor performance in developed countries, particularly the deepening eurozone crisis. The possible impact could be profound and be transmitted through three channels.
First, given the extensive economic ties between Europe and emerging economies, sharp falls in external demands would undermine exports of developing countries and depress international transaction. "The trade level is declining, and imports in the eurozone is coming down," he said.
Second, the financial shock would bring more volatility. In his view, if the European banks are under pressure, it would have a freezing effect on the rest of the global banking system. The European banks will have to scale down their lending to emerging markets and there is going to be "a credit crisis which we have already seen to a degree."
Furthermore, the fear about eurozone crisis would spread in this globalized world and dampen market confidence.
As for the policy buffers against possible turbulence, Dadush pointed out that there is no general solution since situations vary from one country to another.
According to him, although the emerging markets do not have so much policy room as they did one year ago, they still "have much more room than the advanced countries to respond in general with both fiscal and monetary policies."