We need 'a lot more help from President Trump' to prevent a global recession, says Moody's chief economist
- Moody's chief economist says that to stave off recession we're "going to need a lot of help from President Trump."
- In an interview with CNBC's "Squawk Box Asia," Mark Zandi said there's "uncomfortably high" chance of a recession striking the global economy within the next 12-18 months.
- He added that events such as tariff hikes, Brexit, and monetary stimulus only increase the risks and so to battle it governments are going to have to spend, and the trade war can't get worse.
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Moody's chief economist does not have much hope for the economy.
In an interview with CNBC's "Squawk Box Asia," Mark Zandi, chief economist at Moody's, said that there's an "uncomfortably high" chance of the global economy facing a recession in the next 12 to 18 months."I think risks are awfully high that if something doesn't stick to script then we do have a recession," Zandi said, adding that "even if we don't have a recession over the next 12 to 18 months, I think it's pretty clear that we're going to have a much weaker economy."
Zandi also added that to avoid recession, then a number of factors need to "stick to script." For Zandi this meant the US not increasing tariffs and escalating the trade war, a smooth transitional Brexit agreement, and also central banks cutting rates and providing monetary stimulus in order to "sneak through," without a recession.
As a result, Zandi called upon the president and central banks to push for policy that stimulates the economy and doesn't worsen trade tensions.
"We're going to need a lot of help from the Fed, we need help from other central banks and certainly going to need a lot of help from President Trump for him not to pursue this trade war and certainly not escalate the war," the economist added.
"If anything else goes wrong then I think we will be in recession."
To add to his bearish sentiment, Zandi said that policymakers need to step up, and it can't just be up to central banks to try and revive the economy."The central banks are running out of room, we need fiscal policymakers to step up but I don't think, at this point, it's clear where the political will for doing that is going to come from," he said.
On Tuesday signs of a slowdown loomed further, as the IMF warned that trade wars could slow global growth to its weakest pace since the financial crisis.
"The weakness in growth is driven by a sharp deterioration in manufacturing activity and global trade, with higher tariffs and prolonged trade policy uncertainty damaging investment and demand for capital goods," said Gita Gopinath, the IMF's chief economist.