A Worldwide Downturn Looms, New York City Mayor Warns

Source : TODAY, Tuesday, October 2, 2007

Michael Bloomberg, founder of the financial news and data giant, has warned of a looming global economic downturn that is triggered by the run-up of public debt.

Mr Bloomberg, who is also New York City's Mayor, said governments should build up a surplus to fall back on during economic slides, according to AFP.

"Being a fiscal conservative means preparing for the inevitable economic downturns — and by all indications, we've got one coming," he told Britain's Conservative Party conference in Blackpool.

But, he said, it was unclear if the downturn would be a "a dip or a dive".

Agreeing, economists said the question is the kind of slowdown the global economy would face.

"What we are looking at is whether cutting rates and pumping liquidity into international markets are sufficient to prevent a hard landing," said Mr Vishnu Varathan, an economist at Forecast.

However, Mr Varathan thinks cutting government spending is not the right thing to do at this stage.

"If governments were to cut down on spending at the same time the private sector is contracting, that will actually deepen the down cycle," he said.

HSBC economist Mr Robert Prior-Wandesforde is expecting growth to slow, but not significantly. He predicted Asian economies would expand 7.6 per cent this year and 7.5 per cent next year.

"We are still confident that Asia can withstand any further slowdown in the US economy, actually very well," he said.

"That is premised on the view that US economy doesn't go into a recession, which seems unlikely at this stage."