Global economy will not suffer another deep recession
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People's Daily, August 25, 2011
The constant deterioration of the U.S. and European debt crises has resulted in a deep market concern about the collective "double dip" of the developed economies. Zhang said that the current crisis is due to the problems in the U.S. economy that serves as the world’s economic center and the "engine" of world finance. The European debt crisis has even intensified the spread of the financial storm.
Hong Pingfan, director of the Global Economic Monitoring Center under the U.N. Department of Economic and Social Affairs, said that the U.S. and European debt crises have become the principal risks threatening the global economic stability and growth now and over the next several years. This will not only increase the financing costs of each state government but also gradually hurt the real economy including enterprises. What’s even worse is that they will greatly undermine the confidence of consumers and investors and lead to financial market turbulence.
Global economy will not have negative growth
While being interviewed by the reporter of the People's Daily, Mei Xinyu, a senior researcher from the Research Institute under the Ministry of Commerce, refuted the viewpoint that the global economy will decline to the bottom again. He believes that the crisis probably will prolong the depression and recovery periods for Europe and the Untied State, but is unlikely to lead to a new period of great economic declines.
Mei believes that since the worsening situations of U.S. financial and debt will last for a long period of time and the deficient political system and domestic social consciousness of the United States will make the issue even worse, international market participators' confidence in the U.S. economy and politics will obviously weaken. However, the tangible U.S. economic sector currently has better cash flows and revenues than that at the peak of the sub-prime mortgage crisis. In addition, the U.S. currency hegemony has not loosened and the emerging countries in Asia and Africa still have stable economic growth. Therefore, the depression period will be prolonged, but a global economic slide will not appear.
Zuo Xiaolei, a senior economist from China Galaxy Securities, also expressed her support for Mei’s viewpoint by using data. She said that the current economic decline and the global economic decline starting from 2008 are not at the same level. In 2008, as the Lehman Brothers went bankrupt, the whole U.S. financial system was almost paralyzed. In the first half of 2009, the major economies of the world experienced a great economic depression, the United Kingdom declined by 9.8 percent, the United States declined by 6.8 percent and Germany declined by 5.6 percent.
Zuo believes that, regarding the current economic situations, developed economies have a slow average economic growth of about 2 percent, and the debt crisis further indicates that a strong force with the potential to drive future economic growth still has not appeared. Due to the financial deficit of each country and the global debt crisis, the policies cannot play a positive role in promoting economic growth and recovering confidence, and they will further restrain economic growth.
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