Nouriel Roubini, one of the few economists who accurately predicted the magnitude of the world’s recent financial crisis, believes the chance of a double-dip recession in the U.S. economy is increasing because of risks related to poor economic data in the country coupled with Europe’s ongoing debt crisis.
In a research paper, cited by CNBC, Roubini writes that because of the risks associated with exit strategies from the massive monetary and fiscal easing, the US faces challenges in the second half and “appears far too close to the tipping point of a double-dip recession”.
According to the paper, Roubini expects at best a U-shaped recovery this year, where “growth will be anemic and below trend for at least a couple of years”.
The euro zone is also facing an increased risk of a double-dip fall as they try to restore fiscal solvency and discipline. According to Roubini’s paper, even if the euro zone’s delicate situation improves as gov’ts work together to better align structural policies in support of the euro and does not suffer a double dip, growth in demand will be even more limited and this will hurt the United States’ potential for export growth.
The Roubini Global Economics benchmark scenario, notes CNBC, puts the risk of a double dip at 20%, while a slow, protracted, U-shaped recovery is given the highest probability of 60%.