Azerbaijan, Baku, November 2 / Trend , A.Badalova /
The probability of repetition of the global financial crisis is high enough, Cornell University macroeconomics professor Iwan Azis said.
"The world economy is still falling but at the slower rate," Azis told Trend via e-mail.
According to him, no way that the worst is over.
With regards to the US economy, Azis believes that the recession is likely over by middle next year. "The recovery will start around late July or early August 2010. This date is later than the administration and the Federal Reserve have often predicted," he said.
Last week, the U.S. Department of Commerce announced data on the 3.5 percent growth of GDP in the third quarter, which indicates country's withdrawal from the recession, which has been experienced since December 2007. In the second quarter, the country experienced economic decline by one percent, but in the first quarter - 6.4 percent.
The Federal Reserve declared that the US economy has begun to "level out" amid growing confidence in US markets that the country is heading for recovery. Indeed, by the third quarter 2009 the U.S. economy has shown increasing signs of stabilization. Some financial conditions have improved, the interbank spreads have returned close to pre-crisis levels, and corporate issues have rebounded, the Professor said. Yet, a survey conducted by the Association for Financial Professionals in early October showed that only 11 percent of chief financial officers and treasury executives believed the recession had ended, and 20 percent saw the downturn winding down before the end of the year. On the other hand, a large majority (69 percent) believed the recession would continue well into 2010."
According to Azis, the role of the financial sector is so vital that the very first policy measure taken by the administration was directed towards restoring this sector.
"The problems in the US financial and housing markets are so severe and interrelated that the adverse effect on the economy worked not only directly through a traditional credit crunch that caused consumption and investment to fall but also indirectly through the non-functioning of the securities market," Azis said.
Since the deterioration of most asset values corresponds to mortgage-related assets, the resolution of the credit crunch problem depends largely on what happens in the housing market, particularly on the size of foreclosure and the level of housing prices, Azis said.
"But as long as confidence is not restored and problems in the financial and housing sector remain, almost all measures are bad solutions," Azis said.
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