Slowdown won't hurt rest of world much due to strong global growth: Media baron
CLOSELY LINKED WORLD: Mr Forbes dismisses suggestions of a decoupling of growth between regions, as global markets are even more tied together and worldwide supply chains become more complex. -- ST PHOTO: CHEW SENG KIM
THE United States economy is slowing down this quarter and next but a recession is unlikely as growth may rebound next year, Mr Steve Forbes told an audience of top executives here yesterday.
Mr Forbes, president and chief executive of top business magazine Forbes, said the fundamentals for expansion are still in place.
They include a productivity boom, strong US consumer balance sheets and strong corporate balance sheets, he said at the Forbes Global CEO Conference gala dinner held at the Ritz-Carlton Millenia hotel.
The US sub-prime housing loans crisis will also 'quickly pass', he said, but only if the US Federal Reserve cuts interest rates by a full percentage point at its meeting next Tuesday.
It must also maintain liquidity - the 'oxygen and life blood' of financial markets - in the system to make sure the markets do not 'seize up', he added.
All this will be good news for the global economy, as it is still vulnerable to a slowdown in the US economy, which makes up about 30 per cent of the world's total.
'We are more integrated than ever before, so if the US economy is in trouble, it will have global impact,' he said.
But 'the global economy is growing even more powerfully than ever', so there 'won't be a repeat of the Asian financial crisis of 1997', he said.
He dismissed notions of a decoupling of growth between regions, asserting that global markets are 'in fact more tied together', as global supply chains become more complex and risks are spread across markets.
Still, a US economic slowdown may force China to raise its own consumption, which is 'not a bad thing for China and the rest of the world', said Mr Ronnie Chan, chairman of Hang Lung Properties, a property developer in China.
China is 'not spending enough' relative to its economic output, so higher consumption would help to address the trade imbalance that China has with key countries such as the US, he said. He was one of five panellists who spoke at the gala dinner, on issues that drive or derail global economic growth.
He noted that China's 'systematic weaknesses' in the use of technology, corporate governance and social institutions have been overlooked by the world. These may trigger a slowdown in China.
Another key concern for the global economy was oil prices, which rose above US$75 per barrel recently. Dr Gary Ross, chief executive of Pira Energy Group, predicted that 'prices will continue to be very high, and rise even higher next year'.
'The fundamentals are still there for expansion - there is a productivity boom, there are strong US consumer balance sheets and corporate balance sheets are in strong condition overall.' MR FORBES, on the upbeat outlook
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