Speaking at the SteelOrbis 2017 Spring Conference & 76th IREPAS Meeting held in Budapest on March 26-28, OTP Bank chief economist Gergely Tardos said regarding the US economy that the business cycle is in the middle of the maturity phase and, since the US economy is enjoying a long recovery, a cyclical downturn cannot be ruled out. He pointed out that forecasts suggest accelerating growth due to the fiscal boost, while one forecaster expects a recession for 2019. Regarding the possible outcomes of Trump’s economic policy, Mr. Tardos said that fiscal expansion can result in an annual GDP growth in the short run to four percent and in the fiscal deficit going from 2.5 percent of GDP to 7-8 percent and raising government debt. He added that, if protectionism increases globally, it will hurt every country.
Talking about the EU, Mr. Tardos said that the EU economy has been characterized by drastic crisis effects - even a total disintegration was on the cards - fragile growth, unsustainable debt trajectories and extra-loose monetary policy. The OTP Bank official indicated that, instead of slowing down, growth gained momentum and sentiment improved in 2016, while the labor market improved sizeably, with employment reaching the pre-crisis peak in the euro zone. He said that, given the risks the Italian and Greek economies are posing, the outlook for the EU is cautiously optimistic.
Lastly, focusing on China, Mr. Tardos indicated that China’s export-driven growth model has been replaced by an investment-driven one. In 2012-13, China tried to change the model again by making consumption the major driver, supported also by occasional public investment programs. He went on to say that China is likely to see a further moderate slowdown in growth and structural changes from investment to consumption will go on, while risks for China include a full-scale banking crisis and a sharp currency depreciation.