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Greenspan sees a one-third chance of U.S. recession

Greenspan sees a one-third chance of U.S. recession
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First Published: Fri, May 11 2007. 09 47 AM IST
Updated: Fri, May 11 2007. 09 47 AM IST
Shamim Adam, Bloomberg
Singapore: Former Federal Reserve chairman Alan Greenspan said he still sees a one-third chance of a recession in the U.S. economy this year, according to a person who attended the presentation.
“My arithmetic says if there’s a one-third probability of a recession, then there’s a two-thirds probability there won’t be a recession,” Avi Dwipayana, president director of PT Trimegah Securities quoted Greenspan as saying. The former Fed chairman spoke via satellite from Washington to delegates at a Merrill Lynch & Co. conference in Singapore today.
Greenspan said “asset-related” problems are more likely in Asia that a repeat of the 1997 financial crisis that depleted the region’s foreign-exchange reserves. China’s CSI 300 stock index has gained 80% so far this year.
The U.S. stock market yesterday tumbled the most in almost two months after falling retail sales, higher import prices and a wider trade deficit heightened concern the economy will slow. U.S. policy makers on 9 May kept the benchmark interest rate at 5.25% and said inflation is the biggest risk facing the economy despite a yearlong slowdown.
“It’s hard to imagine the U.S. economy going into recession, when the Fed keeps rates so low,” said Kazuhiko Sano, chief strategist at Tokyo-based Nikko Citigroup Ltd, the fifth- largest buyer at government debt auctions.
In March, Greenspan said there was a “one-third probability” of a recession this year and the current expansion wouldn’t have the staying power of its decade-long predecessor.
Greenspan in late February predicted that U.S. economic growth might stagnate, a view at odds with those of Ben S. Bernanke, his successor, and other Fed officials.
Asia’s Growth
Asia’s export-dependent economies will be hurt by a slowdown in U.S. consumption, Dwipayana said, citing Greenspan.
“If consumption in the U.S. slows, exports out of Asia will slow down,” he quoted Greenspan as saying.
His comments contrast with the conclusion drawn by Asian finance ministers attending the Asian Development Bank’s annual meeting in Kyoto this month.
Asia will withstand a slowdown in the U.S. and Europe this year, driven by expansion in China and India, the two fastest- growing major economies in the world, the region’s finance ministers said.
The ADB in March raised its forecast for the region’s developing economies this year, citing a pick-up in spending by consumers and companies that will cushion the impact of weaker exports.
“While a moderate slowdown is expected this year in the U.S. and the European Union, I believe China and India will continue to be the driving forces of the world economy,” said South Korean Finance Minister Kwon Okyu.
Greenspan was speaking at a Merrill Lynch & Co. conference in Singapore, via satellite from Washington.
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First Published: Fri, May 11 2007. 09 47 AM IST
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