The global economy will likely avoid the worst outcomes this year, according to long-time perennial bear Nouriel Roubini.
He acknowledged that most economists' predictions for a 2023 recession were wrong, writing Monday in Project Syndicate that forecasters should approach 2024 with “humility.”
“Right now, the worst-case scenarios seem the least likely. But a number of factors, not least geopolitical developments, could spoil this year's forecast,” Roubini wrote.
His relative optimism deviates from his typical dire predictions, earning him the nickname “Dr. Doom” because he has routinely warned of impending economic and financial market crashes over the years.
Instead, Roubini said the U.S. and other advanced economies will likely achieve a soft landing, which he called the best outcome for stocks and bonds because it avoids both a recession and a rise in inflation.
While a soft landing has now become the default call for most economists, Roubini added that it is also possible that the US will not achieve a landing where growth remains robust and inflation control does not meet market expectations. This is not good for either stocks or bonds as it means monetary policy has to stay at higher levels for longer.
There's also the possibility of a “bumpy landing,” involving both a short, shallow recession and a more severe recession, although he said that was unlikely.
“In terms of the global economy, both a no-landing scenario and a hard-landing scenario appear to be extremely likely tail risks at this time, even if the probability of a non-landing is higher for the US than for other advanced economies,” Roubini said. “Whether there is a soft or bumpy landing depends on the country or region.”
He even thinks China may be able to avoid the worst-case scenario, as Beijing is expected to implement moderate stimulus measures enough to push growth to just over 4% in 2024.
“Ultimately, China can avoid a full-scale hard landing with a severe debt and financial crisis; but it likely looks like a bumpy landing with disappointing growth,” he said.
Of course, Roubini highlighted several risks that will continue to loom.
Geopolitical unrest between the US and China could increase risk and lead to lower growth and inflation. Investors will also be watching the U.S. presidential election for an additional shock, although its outcome will play a bigger role in 2025, he said.
Other possible stagflationary shocks include a rise in energy prices if the Israel-Hamas conflict escalates into a broader regional war between Hezbollah and Iran that disrupts oil production and exports, Roubini said.
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