A spiraling default crisis in Europe poses the “single biggest threat” to the world economy, IHS Inc. chief economist Nariman Behravesh said today in an interview on Bloomberg Television.
“The predominant risks are on the downside” to the global economy, he said on Bloomberg Television’s “Surveillance Midday” with Tom Keene. Those risks included China’s ability to “engineer a soft landing,” he said.
Behravesh said economic research firm IHS had “penciled in” a recession for Europe, while the U.S. would probably avoid a renewed slump. Emerging economies like China and Brazil would continue to be the drivers of world growth, while developed economies, including the U.S., will see “sluggish growth.”
“It’s very much still this sort of a two-speed world,” he said.
IHS forecasts the U.S. economy will grow 1.8 percent next year, he said. “It’s not great, it’s not horrible either. It’s sluggish but no double dip,” he said, referring to another recession.
Growth at that pace would generate 125,000 to 150,000 jobs a month, which he said would only bring down U.S. unemployment from its current 8.6 percent rate “very gradually.”
He said Federal Reserve monetary policy could do little to bring down unemployment. “What’s going to drive down the unemployment rate is confidence on the part of businesses and consumers, for consumers to spend, for businesses to hire.”
Better-than-forecast economic data in recent months in the U.S. had given the Federal Reserve more latitude to weigh its monetary-policy options, he said. “In that sense, it doesn’t necessarily have to pull the trigger on” additional quantitative easing “or anything dramatic yet,” he said.
“Given the economy is looking a little better, it does have more room to maneuver,” he said. “The Fed in that sense is very fortunate.”
To contact the editor responsible for this story: Christopher Wellisz in Washington at firstname.lastname@example.org