"The global recession will be less severe than in 2008-2009"
- Malcolm Sawyer
Ongoing European market turmoil keeps the uncertainty level high making investors and taxpayers even annoyed while no clear answers are given on developments in the nearest future. In order to find out the expert's opinion on the matter, Dukascopy has interviewed Malcolm Sawyer, Professor of Economics at University of Leeds.
1) Professor, what is your forecast of the economic situation in the UK?
I consider that there is a likelihood of some recession in the UK in a formal sense. The output will decline quarter by quarter; nonetheless, I do not believe the recession will be as severe as in 2008-2009. Then again, there will be a kind of recorded recession with a very negative growth. More particularly, the unemployment will continue to rise quite substantially for at least the next year or two. As I see the situation, the unemployed, especially the youth, will be affected the most. It also looks like the government sector will be reduced so the employees in the public sector and the recipients of the public services will also be negatively influenced.
2) To your mind, in terms of a hypothetical global recession which countries would the most disturbed?
As so far the recession is related to the issues in the Euro zone, I imagine that with the Greek default and banks having considerable difficulties within the Euro zone, in a geographical sense the main losers are likely to be the Mediterranean member states of the Euro zone. Countries like the UK and the US will bump along close to the recession but perhaps will not go into recession.
It looks as though the US will experience a slowdown, I believe there will be no recession in the US. One presumes the gainers or so to say, the ones that will not be losing as much, would be China and other East-Asian countries. If we take the Latin and South America, my impression is that the recession after the financial crisis of 2008 had a lesser effect than it did in other countries. But whether that would be repeated now I do not know.
I would also notice here what effect the potential global economic slowdown is going to have on the commodity prices. It looks as though a number of countries like Australia, perhaps also the countries of South America have gained through rising commodity prices in certain areas so they did not have a huge damage from the recession as their exports were booming being based on the commodity prices. What happens in these countries in the future will depend on the commodity prices.