Nouriel Roubini maintains downbeat outlook

Nouriel Roubini released a statement today maintaining that his economic outlook for the US remains pessimistic.

He also made a specific point to counter media reports claiming he is predicting an end to the recession this year, and that he has improved his economic outlook as “taken out of context”.

Nouriel Roubini, Professor at New York University, not only predicted the credit crunch, but also accurately predicted the different stages of the financial crisis that would unfold.

He maintains that while the US is likely to see the recession continue another five months, taking it to the years end, he does not see economic growth from 2010 as being more than 1% per year in the mid term.

Additionally, he also warns that there remains the danger of the economic crisis deteriorating further next year.

According to Professor Roubini, “I have also consistently argued – including in my remarks today - that while the consensus predicts that the US economy will go back close to potential growth by next year, I see instead a shallow, below-par and below-trend recovery where growth will average about 1% in the next couple of years when potential is probably closer to 2.75%.

“I have also consistently argued that there is a risk of a double-dip W-shaped recession toward the end of 2010, as a tough policy dilemma will emerge next year: on one side, early exit from monetary and fiscal easing would tip the economy into a new recession as the recovery is anemic and deflationary pressures are dominant. On the other side, maintaining large budget deficits and contin ued monetization of such deficits would eventually increase long term interest rates (because of concerns about medium term fiscal sustainability and because of an increase in expected inflation) and thus would lead to a crowding out of private demand.

“While the recession will be over by the end of the year the recovery will be weak given the debt overhang in the household sector, the financial system and the corporate sector; and now there is also a massive re-leveraging of the public sector with unsustainable fiscal deficits and public debt accumulation.”

Professor Roubini also expects US unemployment to reach close to 11% in 2010.

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