Roubini-Weighs-the-Positives-and-Negatives-of-a-Global-Economic-Recovery

While the outlook has improved for the U.S. and global economy, Nouriel Roubini, professor of economics at New York University’s Stern School of Business, said on June 7 that he continues to see plenty of reasons to be concerned going forward. That was not surprising to hear from the man often referred to as “Dr. Doom” for his frank, no-nonsense assessment of the economy.

Roubini, also chairman and founder of Roubini Global Economics, provided the opening keynote presentation at REITWeek 2011: NAREIT’s Investor Forum® in New York City, and he gave a ray of hope to the nearly 2,000 attendees when he said REITs were one of the bright spots in the real estate market. This is due to the recovery being made in the commercial real estate space, while the single-family housing market continues to struggle, he said.

Other encouraging signs for a global rebound include the fact that we just came out of such an “ugly” recession and that many of the risk factors are lower now than they were a year ago. In addition, the corporate sector has taken steps to cut costs that have resulted in better earnings. Roubini said that one caveat is that they are cautious in spending the excess cash.

Globally, Roubini pointed to Latin America, parts of Central Asia as well as sections of Africa and the Middle East, among the emerging markets that are poised for long-term growth, which he said is a plus for a global economic recovery.

In addition, notable events of 2011, including the Japanese earthquake and rising food and oil prices, have proven to offer more shock to recovery efforts this year, but have not completely derailed the progress made. That is in part because Roubini believes the market is better prepared for unexpected challenges this time around.

“This year the recovery is stronger and more resilient than last year,” Roubini said.”Hopefully the shocks in the last three to six months won’t get worse. But if some persist, the economy will weaken again.”

And that seems to be a definite possibility given the fact that Roubini said the risks to a successful economic recovery appear to outweigh the positives. He said in recent weeks many economists have become worried about a global economic slowdown.

“Optimists say it’s a soft patch,” said Roubini, who said that some argue that it may continue into the second part of the year.

Roubini said the financial crisis was caused by excess leverage and that will have lingering consequences.

“It will be an ongoing process of deleveraging as a way of reducing debt in the public and private sectors,” said Roubini. “The process of deleveraging would be painful and take a couple of years, it will be a growing process.”

Other concerns Roubini mentioned that could slowdown recovery efforts included damaged financial systems in parts of Europe such as Greece, Ireland and Spain, a loss of competitiveness in the U.S. due to the growing budget deficit and a lack of job growth, and emerging markets that are growing too fast.

“Many of these countries are behind the curve in policy tightening, they aren’t tightening fast enough,” said Roubini, adding that while they are low risk right now the risk is rising.

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Roubini Weighs the Positives and Negatives of a Global Economic Recovery

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