Economists fear a US recession in 2021

Cargo being unloaded from a ship at the Port of Long Beach, California. Latest data shows a mixed picture of the US economy. (AFP)
Updated 19 August 2019

Economists fear a US recession in 2021

  • Trump’s higher budget deficits ‘might dampen the economy’

WASHINGTON: A number of US business economists appear sufficiently concerned about the risks of some of President Donald Trump’s economic policies that they expect a recession in the US by the end of 2021.

Thirty-four percent of economists surveyed by the National Association for Business Economics, in a report being released Monday, said they believe a slowing economy will tip into recession in 2021. 

That’s up from 25 percent in a survey taken in February. Only 2 percent of those polled expect a recession to begin this year, while 38 percent predict that it will occur in 2020.

Trump, however, has dismissed concerns about a recession, offering an optimistic outlook for the economy after last week’s steep drop in the financial markets and saying on Sunday, “I don’t think we’re having a recession.” A strong economy is key to the Republican president’s 2020 reelection prospects.

The economists have previously expressed concern that Trump’s tariffs and higher budget deficits could eventually dampen the economy.

The Trump administration has imposed tariffs on goods from many key US trading partners, from China and Europe to Mexico and Canada. 

Officials maintain that the tariffs, which are taxes on imports, will help the administration gain more favorable terms of trade. But US trading partners have simply retaliated with tariffs of their own.

Trade between the US and China, the two biggest global economies, has plunged. Trump decided last Wednesday to postpone until Dec. 15 tariffs on about 60 percent of an additional $300 billion of Chinese imports, granting a reprieve from a planned move that would have extended duties to nearly everything the US buys from China.

The financial markets last week signaled the possibility of a US recession, adding to concerns over the ongoing trade tensions and word from Britain and Germany that their economies are shrinking.

The economists surveyed by the NABE were skeptical about prospects for success of the latest round of US-China trade negotiations. Only 5 percent predicted that a comprehensive trade deal would result, 64 percent suggested a superficial agreement was possible and nearly 25 percent expected nothing to be agreed upon by the two countries.

The 226 respondents, who work mainly for corporations and trade associations, were surveyed between July 14 and Aug. 1. That was before the White House announced 10 percent tariffs on the additional $300 billion of Chinese imports, the Chinese currency dipped below the seven-yuan-to-$1 level for the first time in 11 years and the Trump administration formally labeled China a currency manipulator.

As a whole, the business economists’ recent responses have represented a rebuke of the Trump administration’s overall approach to the economy.

Still, for now, most economic signs appear solid. Employers are adding jobs at a steady pace, the unemployment rate remains near a 50-year low and consumers are optimistic. US retail sales figures out last Thursday showed that they jumped in July by the most in four months.

Etihad and Air Arabia start Abu Dhabi-based budget carrier

Updated 45 min 46 sec ago

Etihad and Air Arabia start Abu Dhabi-based budget carrier

  • The new Air Arabia Abu Dhabi will be launched in due course: Etihad CEO
  • Etihad invested heavily in carriers around the world

LONDON: Etihad Airways is setting up a low-cost carrier with Air Arabia in what is a major change of direction for the Abu Dhabi-based airline.
It represents Etihad’s first tie-up with another airline since its ill-fated equity alliance strategy which saw it take stakes in a number of struggling European carriers, some of which went bust, including Air Berlin.
Air Arabia Abu Dhabi will operate from Abu Dhabi International Airport and will target rising demand from the budget segment, the pair said in a statement on Wednesday.
Etihad Group CEO Tony Douglas said: “This exciting partnership supports our transformation program and will offer our guests a new option for low-cost travel to and from Abu Dhabi, supplementing our own services.”
Abu Dhabi-based Etihad and Dubai-based Emirates invested heavily in their premium-cabin offering during the UAE’s boom years, tapping into strong regional demand for business and first-class travel. However, the sharp fall in oil prices since 2014 and a regional economic slowdown has hit premium travel hard and forced both carriers to cut costs and lay off staff.
Etihad’s move into the low-cost segment mirrors a similar partnership between Emirates and flydubai, the low- cost carrier started in 2008.
Etihad and Air Arabia did not say when flights would start or which routes would be served, but that further details “would be communicated in the near future.”
While premium travel continues to face headwinds in the Gulf, demand remains strong in the budget segment. Low-cost carriers accounted for a 17 percent share of seat capacity to and from the Middle East in 2018, compared to only 8 percent in 2009. 
Etihad Airways currently flies to about 80 destinations with a fleet of 108 Airbus and Boeing aircraft that carried 17.8 million passengers in 2018. Air Arabia, which is listed on the Dubai Financial Market, operates 54 Airbus A320 and A321 aircraft and serves 170 routes.