SINGAPORE, Nov 14 (AFP): The US housing slump will next year drag the world's biggest economy into a recession that will hit growth in Asia as well, investment bank Morgan Stanley said today.
Stephen Roach the chairman of Morgan Stanley Asia and formerly its chief economist, said in Singapore the likelihood of a US recession was above 50 per cent.
"I think it's more likely than not that the United States will enter a recession in 2008," Roach told reporters on the sidelines of Morgan Stanley's regional summit.
"So that would certainly put me above the 50 per cent probability of a recession for next year and it's a recession that was sparked by housing but ultimately will involve the housing-dependent US consumers," he said.
His predictions followed comments by US Federal Reserve chairman Ben Bernanke last week that the world's economic superpower will experience "sluggish" activity early next year as mortgage and credit problems deepen.
Roach does not know how severe the US recession, if it does occur, will be but said an average downturn usually lasted more than five to six quarters and shaved 1.25 per cent off real gross domestic product.
On Asia, Roach sees the region continuing to grow at a robust pace but export-dependent Asian economies will not be spared from the spillover of a US recession.
"It's a region that has been growing rapidly and we continue to think will expand at a very vigorous pace over the years to come," said Roach.
"But it's also a region that is clearly highly integrated in the world economy through export-dependent economies ... I think it's ludicrous to think that Asia would be an oasis in a context of a global disturbance," he said.
Morgan Stanley sees US headed for recession
FE Team | Published: November 15, 2007 00:00:00 | Updated: February 01, 2018 00:00:00
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