Emerging markets will need to become the main source
of global demand if economic recovery is to continue,
leading US economist Barry Eichengreen told Emerging
Everything hinges on whether consumers in Korea, or
China, and elsewhere continue to spend going forward,
said Eichengreen and thats a gamble.
If emerging market governments begin to cut back too soon on
stimulus, global growth could stall, he added.
Eichengreen, professor of economics and political
science at the University of California, Berkeley, spoke to
Emerging Markets at the end of an Institute of
International Finance seminar at which leading economists
painted a gloomy picture of global prospects.
Their views contrasted sharply with the upbeat assessment
set out yesterday by the IMFs International Monetary and
Finance Committee, which declared that all the components
[of a global recovery] are in place.
Eichengreen and other speakers all but ruled out the
prospect of a V-shaped global recovery and pointed
instead to host of problems that could stall it.
New York University economics professor Nouriel Rubini told
the seminar that the global economy is on the floor and
trying to rise. But, he added, we are stuck in a
problem and we are not going to be able to resolve it any time
Eichengreen talked of the gloomy prospects for an
upturn, especially in advanced economies. Consumption
figures in the United States and other advanced economies
are better but still bad, he noted. The US is
looking to export more on the back of a weakening
dollar, he noted. But where is the demand going to come
The key to this demand lies with emerging market economies,
he suggested. Roubini agreed that the role of the US a
consumer of last resort is over for the time
There is a glut of production capacity in the global
economy and countries such as China are adding to this, by
devoting much of their fiscal stimulus to new investment, he
said. Only public demand is keeping things going,
He and others emphasised that now is not the time for fiscal
and monetary stimulus to be withdrawn in advanced or emerging
economies. But on the other hand there are dangers of courting
inflation if stimulus is continued for too long, Roubini noted.
There are policy risks in doing anything too soon or too