Allianz’s El-Erian Highlights Politics as Risk to Global GrowthBy
Mohamed El-Erian, Allianz SE’s chief economic adviser, warned that there could be a risk of a global economic downturn if politics gets messy.
If politics around the world become more inward looking, “we risk going from low growth to recession, from artificial financial stability to unsettling financial volatility,” El-Erian said at the Asian Financial Forum in Hong Kong on Monday.
El-Erian said that there is a “strong view” that 2017 will be more of the same as 2016 but with some upside. Based on this view, he expects global growth to be below 3 percent in 2017.
However, if U.S anti-trade efforts intensify and if anti-establishment movements do well in elections leading to a surge in nationalism, this could hurt the global economy. He likened the global economy to a classroom, which is expected to perform better in 2017, but with risks of derailment.
“You are a teacher, and at the beginning of the year the principal comes to you and says, ‘I have good news for you,’” said El-Erian. “Your classroom, the global economy, is going to be slightly better than last year.”
“Then the principal comes and tells you, but there is one qualification, you may have a situation where the trouble makers take control of the class,” he said.