World fears years of slow growth: Stephen Roach, Morgan Stanley
The world faces years of “growth scares” as a weak recovery grinds on with little to cushion against periodic shocks, Morgan Stanley’s Stephen Roach said.
By Bloomberg | Updated:
HONG KONG: The world faces years of “growth scares” as a weak recovery grinds on with little to cushion against periodic shocks, Morgan Stanley’s Stephen Roach said.
“We had a growth scare last year about this time, we’re having another growth scare this year, and I think we will have growth scares for several years to come,” said Roach, non-executive chairman of Morgan Stanley Asia.
Stocks have tumbled since April on concern that the global recovery is faltering as unemployment rises and housing prices fall in the US, Greece teeters on the edge of a default and Japan deals with the aftermath of a record earthquake.
Higher-than-forecast Chinese industrial output and American retail sales reported on Tuesday may have eased investors’ concerns. “When you have a weak recovery, you don’t have a cushion that enables you to withstand those periodic shocks that always seem to come out and hit specific economies or the world,” Roach said.
“With oil prices up, the euro zone in trouble, the US housing market having another leg down, and the problems in Japan, you’ve certainly had more than your normal fair share of shocks.” Euro-area leaders are wrestling with the terms of another rescue of Greece.
An emergency session of finance ministers in Brussels on Tuesday failed to reconcile a German-led push for bondholders to shoulder part of the cost of a new aid package with European Central Bank warnings that the move might constitute the area’s first sovereign default.
“Greece has a solvency issue given its current debt overhang and the euro zone officials are treating this as a liquidity issue in providing a never-ending stream of bailouts and that’s not the answer,” Roach said.
“Greece is reaching a critical threshold of pressure on the sustainability of its sovereign debt obligations.” The Chinese economy is “doing just fine,” Roach said, adding that officials have a “clear strategy” to shift to a consumer-driven growth model and are alert to the threat posed by inflation.
“We had a growth scare last year about this time, we’re having another growth scare this year, and I think we will have growth scares for several years to come,” said Roach, non-executive chairman of Morgan Stanley Asia.
Stocks have tumbled since April on concern that the global recovery is faltering as unemployment rises and housing prices fall in the US, Greece teeters on the edge of a default and Japan deals with the aftermath of a record earthquake.
Higher-than-forecast Chinese industrial output and American retail sales reported on Tuesday may have eased investors’ concerns. “When you have a weak recovery, you don’t have a cushion that enables you to withstand those periodic shocks that always seem to come out and hit specific economies or the world,” Roach said.
“With oil prices up, the euro zone in trouble, the US housing market having another leg down, and the problems in Japan, you’ve certainly had more than your normal fair share of shocks.” Euro-area leaders are wrestling with the terms of another rescue of Greece.
An emergency session of finance ministers in Brussels on Tuesday failed to reconcile a German-led push for bondholders to shoulder part of the cost of a new aid package with European Central Bank warnings that the move might constitute the area’s first sovereign default.
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“Greece has a solvency issue given its current debt overhang and the euro zone officials are treating this as a liquidity issue in providing a never-ending stream of bailouts and that’s not the answer,” Roach said.
“Greece is reaching a critical threshold of pressure on the sustainability of its sovereign debt obligations.” The Chinese economy is “doing just fine,” Roach said, adding that officials have a “clear strategy” to shift to a consumer-driven growth model and are alert to the threat posed by inflation.
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