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Lin Yifu, a senior vice president and chief economist of the World Bank, warned recently that the foundation for the recovery of the world economy is still extremely fragile and does not rule out the possibility of a recession again. In Other words, the world economy may fall into a "W"-type recession or a "double-bottom" recession.
Lin Yifu is not the only economist who has recently issued this warning. President Kahn, the International Monetary Fund (IMF), and Feldstein, president of the U.S. National Economic Research Bureau, have recently conducted similar research. In the current situation where the global economy is developing well and optimism has prevailed, such warnings are justified.
Under the present delicate circumstances, how should we understand the world economy? How can we not lose confidence and do not take it lightly? The author believes that we must take a holistic view of the world economy, and Kahn's recent remark may perhaps be taken as an illustration: The current economic recovery is "strongly unexpected, but weakness is also a fact."
“Strong†means that the economic recovery momentum is better than expected, especially compared to the straight decline at the beginning of last year. The World Bank's latest "Global Economic Outlook 2010" pointed out that with the implementation of a series of economic stimulus measures, "the most acute phase of the crisis has passed, the world economy is in the process of recovery," the previous credit market freeze, capital flows The extreme situation of complete reversal no longer exists.
From the data point of view, according to the forecast of the IMF, the world economy is expected to grow by 3.1% this year, and the World Bank’s forecast is 2.7%, which is much better than the negative growth of last year.
But "weakness" is also an indisputable fact - it is not only difficult to strengthen in the short-term, but also risky.
First, there is an inflation risk. In order to deal with the worst crisis since the Great Depression, governments of various countries have formulated huge expenditure plans. The interest rates of all countries have fallen to historically rare status. This has contributed to the rapid economic recovery, but it also aggravates the risk of hyperinflation.
Second, there is a risk of lack of driving force. In many countries, growth is the result of “government-driven†stimulus to the economy, and personal consumption has not been effectively activated. Once the government begins to implement “exit strategiesâ€, the economic recovery process may be driven by a lack of drivers.
Again, there is a high risk of unemployment. Take the United States as an example, the recent unemployment rate has remained at a high of 10%, which has become the most important reason for Obama’s decline in support rates. On the economic level, unemployed remains high and will inevitably curb consumption, which in turn will undermine efforts to recover the economy.
In addition, in many countries, the bank’s bad debt problem has not been completely resolved. The bubble in the real estate market has not been completely squeezed out. The new asset bubble has begun to appear. The debt crisis in Dubai and the downgrade of the sovereign credit ratings of Greece and Mexico remind people of the potential The financial risks, which have brought variables to a sustainable economic recovery.
Lin Yifu pointed out that rebuilding the economy and employment will take many years. “We cannot expect to recover from this deep and painful crisis overnight.†Federal Reserve Chairman Ben Bernanke also warned that it is now asserted that the US economy has achieved lasting The recovery is still too early, and although the possibility of a sharp decline in the economy once again is very small, the possibility of a “double bottom†recession cannot be ruled out.
In fact, all these problems point to a core factor, that is, the timing of the implementation of the "exit strategy." This is a dilemma. The World Bank report believes that if the “exit strategy†is implemented too early, that is, before private consumption and investment have effectively become the driving force behind the economic recovery, the economic recovery will probably be premature.
According to speculation, if this is the case, the economic growth rate in developing countries will likely be only 5.1% this year, and only 5.4% in 2011. Some countries may have “negative growth in one or several quarters in the futureâ€. Although it is impossible for the Chinese economy to experience negative growth, the bottoming out of other countries will inevitably drag on the Chinese economy.
However, if the "exit strategy" is implemented too late, the risks also exist. The World Bank warned that if the “exit strategy†cannot be implemented in time, the huge money supply will lead to inflation in the global economy and form a new asset bubble, which in turn will force some countries to adopt a monetary tightening policy. As a result, "it will be a new economic recession." In some emerging economies, "the real estate market and the capital market have created a bubble."
As for whether the Chinese economy has a bubble, it is a matter of opinion. Although some economists believe that the bubble is still not obvious, Andrew Burns, the lead author of the World Bank’s 2010 Global Economic Outlook report, made it clear that the Chinese economy has shown a “bubble signalâ€, “especially in real estate. field". This may also be worth our guard.
Although the world economy’s giant ship has left the most dangerous harbor, in the words of Lin Yifu, it is still sailing in “unknown sea areasâ€. While the economy is showing good development, policy makers in various countries, including China, should maintain firm confidence. However, they should maintain a clear-headed mindset, be prepared for danger in times of peace, and prevent the world economy from slipping into a new recession.
Lin Yifu is not the only economist who has recently issued this warning. President Kahn, the International Monetary Fund (IMF), and Feldstein, president of the U.S. National Economic Research Bureau, have recently conducted similar research. In the current situation where the global economy is developing well and optimism has prevailed, such warnings are justified.
Under the present delicate circumstances, how should we understand the world economy? How can we not lose confidence and do not take it lightly? The author believes that we must take a holistic view of the world economy, and Kahn's recent remark may perhaps be taken as an illustration: The current economic recovery is "strongly unexpected, but weakness is also a fact."
“Strong†means that the economic recovery momentum is better than expected, especially compared to the straight decline at the beginning of last year. The World Bank's latest "Global Economic Outlook 2010" pointed out that with the implementation of a series of economic stimulus measures, "the most acute phase of the crisis has passed, the world economy is in the process of recovery," the previous credit market freeze, capital flows The extreme situation of complete reversal no longer exists.
From the data point of view, according to the forecast of the IMF, the world economy is expected to grow by 3.1% this year, and the World Bank’s forecast is 2.7%, which is much better than the negative growth of last year.
But "weakness" is also an indisputable fact - it is not only difficult to strengthen in the short-term, but also risky.
First, there is an inflation risk. In order to deal with the worst crisis since the Great Depression, governments of various countries have formulated huge expenditure plans. The interest rates of all countries have fallen to historically rare status. This has contributed to the rapid economic recovery, but it also aggravates the risk of hyperinflation.
Second, there is a risk of lack of driving force. In many countries, growth is the result of “government-driven†stimulus to the economy, and personal consumption has not been effectively activated. Once the government begins to implement “exit strategiesâ€, the economic recovery process may be driven by a lack of drivers.
Again, there is a high risk of unemployment. Take the United States as an example, the recent unemployment rate has remained at a high of 10%, which has become the most important reason for Obama’s decline in support rates. On the economic level, unemployed remains high and will inevitably curb consumption, which in turn will undermine efforts to recover the economy.
In addition, in many countries, the bank’s bad debt problem has not been completely resolved. The bubble in the real estate market has not been completely squeezed out. The new asset bubble has begun to appear. The debt crisis in Dubai and the downgrade of the sovereign credit ratings of Greece and Mexico remind people of the potential The financial risks, which have brought variables to a sustainable economic recovery.
Lin Yifu pointed out that rebuilding the economy and employment will take many years. “We cannot expect to recover from this deep and painful crisis overnight.†Federal Reserve Chairman Ben Bernanke also warned that it is now asserted that the US economy has achieved lasting The recovery is still too early, and although the possibility of a sharp decline in the economy once again is very small, the possibility of a “double bottom†recession cannot be ruled out.
In fact, all these problems point to a core factor, that is, the timing of the implementation of the "exit strategy." This is a dilemma. The World Bank report believes that if the “exit strategy†is implemented too early, that is, before private consumption and investment have effectively become the driving force behind the economic recovery, the economic recovery will probably be premature.
According to speculation, if this is the case, the economic growth rate in developing countries will likely be only 5.1% this year, and only 5.4% in 2011. Some countries may have “negative growth in one or several quarters in the futureâ€. Although it is impossible for the Chinese economy to experience negative growth, the bottoming out of other countries will inevitably drag on the Chinese economy.
However, if the "exit strategy" is implemented too late, the risks also exist. The World Bank warned that if the “exit strategy†cannot be implemented in time, the huge money supply will lead to inflation in the global economy and form a new asset bubble, which in turn will force some countries to adopt a monetary tightening policy. As a result, "it will be a new economic recession." In some emerging economies, "the real estate market and the capital market have created a bubble."
As for whether the Chinese economy has a bubble, it is a matter of opinion. Although some economists believe that the bubble is still not obvious, Andrew Burns, the lead author of the World Bank’s 2010 Global Economic Outlook report, made it clear that the Chinese economy has shown a “bubble signalâ€, “especially in real estate. field". This may also be worth our guard.
Although the world economy’s giant ship has left the most dangerous harbor, in the words of Lin Yifu, it is still sailing in “unknown sea areasâ€. While the economy is showing good development, policy makers in various countries, including China, should maintain firm confidence. However, they should maintain a clear-headed mindset, be prepared for danger in times of peace, and prevent the world economy from slipping into a new recession.
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