FCIB Global: Tough Headwinds Ahead Even for Strong Economies

Though admittedly called the economic “Prince of Darkness” at times, Euler Hermes Economist Dan North may have been found himself less pessimistic about worldwide growth prospects than fellow keynote speaker at FCIB’s 25th Annual Global Credit Conference Carolyne Spackman, an economist and VP at American International Group Inc. (AIG).

Spackman said the European Union is showing strong potential for a triple-dip recession. “The EU is still mired in deflation and debt…it’s a dismal picture,” she said.  The Russia-Ukraine situation is only increasingly problems though Russia, which had become an increasing export destination for formerly growing consumption-based activity, showed weakening even before the sanctions arrived. With gas/fuel/oil prices dropping to levels not seen in years, it will only weigh on that economy, and those who bet on its growth, more. That said, with geopolitical tensions rising in multiple regions again, it may be premature to assume low oil prices will stay for an extended period.

Regardless, the returning economic problems in the EU – especially noted by slipping in France and Italy – could have a bit of a domino effect, Spackman and North agreed. China’s economy, though unlikely to see a hard landing, may continue to grow at slightly muted rates because of a lack of buying out of the EU. Spackman noted this could impact even hot Latin American economies because the importance of selling natural resource commodities to Chinese producers. All of it could conspire to throw in a wrench into US Federal Reserve policy as well.

“Will the US think twice about raising interest rates?  It remains to be seen if they will actually raise rates in June,” said a skeptical North. It continues to be noteworthy that the US is doing somewhat well at present, and seems to be improving. But North showed concern with a number of areas that could act as a drag on the US pace of growth over the next decade: a near 100% debt-to-GDP ratio, potential for less consumption in trade markets for several years, a lack of any entitlement reform plan.

- Brian Shappell, CBA, CICP, NACM staff writer
For more coverage from the FCIB Global Conference, check out FCIB_Global on Twitter.com throughout the week.

No comments:

Post a Comment