Speaking at the World Government Summit in Dubai, Nobel Prize-winning economist Paul Krugman warned world policy makers of a global recession, which he felt is likely to hit by next year. He said, “I think that there is a quite good chance that we will have a recession late this year (or) next year.”
He blamed the series of inaccurate economic projections and analysis for bringing economic slowdown and said that “one big thing” cannot prompt an economic downturn.
“The result is clear: forward motion on globalization has stopped, but it was slowing anyway,” Krugman said.
He pointed out that the trade wars and protectionist policies had slowed down the global economy, leading to stagnant wages, growing inequalities, and a loss of confidence in the world’s business leaders which in turn led to a populist backlash against globalization.
The American economist also predicted that Europe would be the first one to be hit by the next “Great Depression”. He said, “The place that looks really close to recession right now is the euro area.”
Last week, the European Commission reduced its forecast for euro zone economic growth in 2019 and 2020. The Commission said that this year’s growth of the euro zone will slow down to 1.3 percent from 1.9 percent in 2018 and is expected to recover a bit in 2020 to 1.6 percent.
He also highlighted the contribution of the technology bubble, which he believes is deflating now.
The economist also made remarks in his column in The New York Times, stating concerns about the large fiscal deficits that have been ignored by the US President Donal Trump’s administration. He called Donald Trump’s tax cut stimulus as “not very effective” Program.
What scares him the most is the lack of preparedness among economic policymakers to tackle the impending recession. Krugman said: “The main concern has always been that we don’t have an effective response if stuff slows down.”
Most economists, as well as some the world’s business elite, agree that the global economy has taken a down turn but projected a different conclusion from recession, saying that there was some hope for a soft landing.
Krugman, who is a Professor at the Princeton University’s Woodrow Wilson School, won the 2008 Nobel Memorial Prize in Economic Sciences for his work on international trade and economic geography.