Recession prophet sees slow recovery

Aneconomist credited with predicting the global financial crisis said Friday he expects a slow recovery for advanced economies, with quicker, robust growth in the developing world.

New York University Prof. Nouriel Roubini said he doesn't expect a "V-shaped" recovery, where the recovery phase is just as dramatic as the descent. Instead, he predicts a slower, "U-shaped" economic recovery with the risk of a relapse recession (also known as a "W-shaped" recovery) if governments don't time the end of stimulus packages correctly.

"I believe that the basic scenario is going to be one of a 'U-shaped' economic recovery, where growth is going to remain below trend especially for the advanced economies, for at least two or three years," he said atthe Ambrosetti Forum on Italy's Lake Como. The annual conference brings together top political and business figures.

"Within that 'U' scenario I also see a small probability but a rising probability that if we don't get the exit strategy right we could end up with a relapse of growth and therefore with a double-dip recession," he said.

Roubini said that "it is very tough not to make a policy mistake" between the opposite risks of ending the stimulus too soon and sending the economy back into recession or too late, which could mean unsustainable budget deficits. Of the two, he said, waiting too long seemed riskier.

"Whether that's highly likely or not, I don't know. I think it certainly is a rising risk," said the prominent economist, among the few experts to predict the current crisis. In April, Roubini said the Canadian economy was likely to fare better than others. "Canada may recover sooner than others, but it will be painful even [here]," he told CBC Newsat the time.

He credited the country's sound banking system for his optimism. It's a theory that's gained prominence as Canada's economy has shown signs of improvement over the summer. Shares in Canada's major lenders have just about doubled since a trough in March.

'The road ahead is going to be at best bumpy, if not worse than that.' Economist Nouriel Roubini

In April, he still saw no end to the recession. "Not any time soon, certainly not this year," he told CBC News. "We may get out of it by the end of next year, if we are lucky."

Even now, amid the cautious optimism being spread by some politicians and economists, Roubini warned against expecting the end of the economic crisis too soon.

"There is now this belief that the crisis is over, the conditions in financial markets are fine, that banks are doing OK," he said. "I think too many people are hopeful that everything is fine, and unfortunately the road ahead is going to be at best bumpy, if not worse than that."

Roubini is widely credited with being among the first economists to predict the credit crisis that stifled worldwide business activity, doing so as far back as 2005.

His pessimism amid a sea of optimism earned him the moniker "Dr. Doom." He is also credited with foreseeing the stock market crash of 1987.