Nouriel Roubini

Nouriel Roubini's Speech Descriptions

Nouriel Roubini examines both the downside and upside risks in the global economy, detailing the tensions and misjudgments that could hamper economic recovery as well as those, which might provide a pleasant economic surprise.

With the US recovery gathering momentum, Nouriel Roubini examines the economic outlook, explaining the positives and warning against some of the factors that might suggest investor caution.

Downside and Upside Risks in the Global Economy

Downside risks include a recurrence of EZ financial stresses, given austerity fatigue and political fragility in the periphery; another fight over the debt ceiling and government shutdown in the U.S; an earlier and more serious hard landing in China; a botching of tapering by the Fed that leads to a renewed taper tantrum and spike in long-term interest rates; a few systemically important EMs experiencing outright financial/currency/sovereign crisis; secular stagnation with very low inflation and Japanification of DMs, with a sharp fall in potential growth; a geo-political development in the Middle East that spikes oil prices; a faster-than-expected pick-up in advanced economies inflation (away from disinflationary pressures), as stronger growth leads to wage growth acceleration; an escalation of geo-political tension in Asia, especially between China and Japan. With the exception of the last one, most of these tail risks are lower-probability events than a year ago.

Upside risks include a U.S. economy that grows faster—closer to 3% plus; more resilient growth in China and a smooth rebalancing of its economy; a sharp reduction in Middle East risks that significantly lower the fear premium in oil prices; significant progress in the EZ toward a full banking, fiscal, economic and political union; and an improvement in global risk sentiment that boosts risky asset prices in a significant way. Of all of these upside risks, a positive growth surprise in the U.S. looks like the most likely.

U.S Economic Outlook

The U.S. economic recovery is gathering momentum. Positives include the recovery of housing after its deep contraction, the shale gas and oil revolution, monetary accommodation by the Fed, the strong profits of corporate firms, the re-shoring of some manufacturing, stronger consumer, business and investor confidence, the rise of the stock market and of other risk markets, greater job creation and entrepreneurial dynamism. Negatives including policy gridlock and uncertainty, regulatory uncertainty and the effects of Obamacare, the variety of fiscal issues that the US needs to address (debt ceiling, medium term fiscal consolidation, fundamental tax reform, entitlements reform), the still ongoing process of deleveraging of the private and public sector; and tail risks from the global economy (EZ crisis worsening, risk of Chinese hard landing, geopolitical tensions impacting oil prices).