China Revives, U.S. Languishes: Citibank Economist

飞雪寒冰

Economies in China and other emerging markets have bottomed out and are now "re-accelerating," while a slowdown in the United States is continuing but at a declining rate, according to Citibank's acting chief economist.

As a result, a key question facing economy watchers has changed in recent months from "where the bottom is" to "the pace of recovery," Don Hanna told Caijng's weekly macroeconomic publication.

"We have seen obviously the bottoming of most emerging market countries, places like China," Hanna said. In China "we actually have a re-acceleration of growth, and that's true in other emerging market countries.

"But there are other important places like Brazil where growth is still slowing," he added.

And economies in the United States and Japan are continuing to decelerate, he said, although their rates of decline are not as steep as last year's.

Hanna ruled out the likelihood of a lengthy, multiple-year global recession, citing as evidence a rising appetite for risk as well as higher prices for commodities and assets.

Banks, governments and households that make adjustments and improve balance sheets are paving the way for recovery. But Hanna said the recovery in general will not be strong, citing the depth of the credit crunch and weak global demand.

The typical pattern for a period of tighter credit and financing is much longer than the typical recovery cycle for gross domestic product (GDP) in a recession, he explained.

飞雪寒冰

Credit crunches tend to last three to five years in bad recessions, but GDP cycles last one to two years, he added.

"When you have a global recession, it is also hard to recover fast initially because you don't have anyone to export to," said the economist.

"Everyone has weak demand, so you can't sell your domestic production to your neighbors, at least initially not as robustly," he said.

However, Hanna predicted the world will see a synchronized and powerful expansion when business conditions begin picking up again.