Stick around, we’re going to be here for a while.
That’s how James Wolfensohn, former World Bank president and chairman of Citigroup’s international advisory board, views the world economy.
“The debate will continue on whether it’s going to be a V, U or L-shaped recession,” Wolfensohn said at a recent conference, according to Bloomberg.
“My own judgment is that it’s more likely the latter. I don’t believe we’ll get a quick fix any time soon.”
Wolfensohn’s view has certainly been borne out by the numbers so far. The U.S. economy shrunk at a 6.1 percent annual rate in the first quarter, after a 6.3 percent plunge three months earlier.
And if you think that was bad, in Europe the 27 economies of the European Union contracted at an average annual rate of about 10 percent in the first quarter. Germany logged its worst performance since reunification in 1990.
Even red-hot Asia is seeing a slowdown. China’s industrial output growth slipped to 7.3 percent year over year in April, from 8.3 percent in March, failing to meet economists’ expectations.
To be sure, Wolfensohn is impressed with how China has handled the slowdown, adopting a $587 billion stimulus package and measures to encourage bank lending.
“It looks as though the government recognizes the problem and is extraordinarily on top of things,” Wolfensohn says.
As for the global economy, he’s in agreement with Paul Krugman, who at the same conference called a V-shaped recession “extremely unlikely.”
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