Looming world recession likely to hit by next year, Nobel Prize Laureate warns

Economist Paul Krugman says recession likely by next year at the latest. (AFP/File)
Updated 12 February 2019

Looming world recession likely to hit by next year, Nobel Prize Laureate warns

  • Krugman says there is a major backlash against globalization
  • Policy makers seem unaware of the concerns voiced by people, Krugman warns

DUBAI: The world will likely enter a recession by next year as the backlash against globalization continues to grow, economist Paul Krugman predicted on Monday.

Speaking at the World Government Summit in Dubai, Krugman warned that world was witnessing a landscape of stagnant wages, growing inequalities, and a loss of confidence in the world’s business leaders which in turn led to a populist backlash against globalization.

“The result is clear: forward motion on globalization has stopped, but it was slowing anyway,” Krugman said.

And he said there is “quite a good chance that we will have a recession late this year or next year.”

He said there was a general lack of preparedness among economic policymakers.

“The main concern has always been that we don’t have an effective response if things slow down…we don’t seem to have a safety net.”

Krugman said central banks lacked the tools required to protect against market turmoil, and planning for risk has been minimal.

Instead, trade wars and growing protectionism continue to dominate policy agendas, deferring attention and resources from what should be the real priorities.

“I don’t see the iceberg out there, but if we do hit one, I know for sure this liner is not unsinkable,” Krugman said, comparing the global economy to the Titanic.

He said people felt short changed by the previous generation of economic growth, but he said those discussing a solution seemed not to be touching on the issue.

“The question is what they want as the solution…turns out that’s not as clear,” Krugman said, highlighting what he called the gap leaders needed to fill in order to avert another “Great Depression.”

On what many are calling the Fourth Industrial Revolution, Krugman warned that, contrary to popular belief “technological change is actually relatively sluggish right now.”

And he said he doubted the claims that technology was so advanced it would soon change the way we work and live, adding “this is not a transformative revolutionary era.”

Krugman concluded that despite the technological advancements of the last 25 years, the way we work “had not changed all that much.”


Bank jobs go as HSBC and Emirates NBD reduce costs

Updated 15 November 2019

Bank jobs go as HSBC and Emirates NBD reduce costs

  • Others have also reduced headcount amid economic downturn and property market weakness

DUBAI: HSBC Holdings has laid off about 40 bankers in the UAE and Emirates NBD is cutting around 100 jobs, as banks in the Arab world’s second-biggest economy reduce costs.

The cuts come amid weak economic growth, especially in Dubai, which is suffering from a property downturn.

HSBC’s redundancies came after the London-based bank reported a sharp fall in earnings and warned of a costly restructuring, as interim CEO Noel Quinn seeks to tackle its problems head-on.

HSBC has about 3,000 staff in the UAE, part of a nearly 10,000-strong workforce in the Middle East, North Africa and Turkey.

The cuts at Dubai’s largest lender Emirates NBD came in consumer sales and liabilities, one source said, while a second played down the significance of the move.

HSBC and Emirates NBD declined to comment.

“The cuts are part of cost cutting and rationalizing to drive efficiencies in a challenging market,” the second source said.

Other banks have also reduced staff this year. UAE central bank data shows local banks laid off 446 people in the 12 months until the end of September. Foreign banks added staff in the same period.

Staff at local banks account for over 80 percent of the 35,518 banking employees in the country.

The merger between Abu Dhabi Commercial Bank, Union Commercial Bank and Al Hilal Bank saw hundreds of redundancies.

Commercial Bank International (CBI) said it would offer voluntary retirement to employees in September, which sources said saw over 100 departures. Standard Chartered, too, cut over 100 jobs in the UAE in September.

Rating agency Fitch warned in September a weakening property market would put more pressure on the UAE’s banking sector.