On Thursday, March 17, 2016, members of the Detroit Association for Business Economics (DABE) were presented with an extremely in-depth presentation entitled “State of the global economy: Recovery, flat, or decline?” by Dr. David Teolis, senior manager, economic and industry forecasting—international, General Motors (GM). Teolis is a veteran economic analyst, with numerous years of experience analyzing international markets and forecasting automotive sales for GM. He has previously served as the president of the DABE.
Teolis provided his analysis on the following topics:
• The global financial crisis and how it exposed structural vulnerabilities (problems that cannot be addressed through monetary policy)—which have contributed to the weakness in the global economic recovery, especially for emerging markets and commodity exporters;
• Low inflation expectations and the risk of deflation in some economies;
• The divergence of monetary policies around the globe (for example, as the U.S. struggles to normalize interest rates, other major economies such as the Eurozone and Japan are implementing negative interest rates, which is contributing to volatile currency markets); and
• The plethora of political risk, which may complicate the assessment of these economic concerns.
Teolis highlighted numerous explanations for the recent slow pace of global economic growth (such as supply-side headwinds, a debt overhang, and a savings glut) that have been offered by world-renowned economists. However, Teolis said he thinks that “secular stagnation,” as posited by Lawrence Summers, may be the primary factor for weak global growth. Teolis stated that he believes that structural reforms around the world are needed to provide a positive shock to the baseline economic outlook while also providing a limit to the downside risks. While low interest rates and accumulating pent-up demand could provide a cyclical economic rebound, Teolis argued that the implementation of structural reforms will better position the global economy for strong and sustainable growth. Absent progress on structural reforms, the economies of the world could remain mired in a period of secular stagnation, with continued volatility in commodity and financial markets. Moreover, the myriad of political uncertainties continue to pose many risks to the outlook for the global economy, said Teolis.
To see the entire presentation by Dr. Teolis, please click here.