Leading U.S. economist says recession will come to an end this year

WASHINGTON. August 18. KAZINFORM The U.S. economy will experience a U-shaped recovery and the recession will come to an end this year, a leading U.S. economist said recently in an exclusive interview with Xinhua, Kazinform cites Xinhuanet.
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RECESSION IN U.S. TO END IN 2009

Mark Zandi, chief economist and co-founder of Moody's economist.com, said the current recession, the most serious one since the Great Depression in 1930s, will end in 2009 followed by a weak growth in 2010 and a much stronger growth in 2011-12.

According to Zandi, the recession will end this year largely due to the U.S. massive monetary and fiscal stimulus.

"The economy will come back in 2010, but it won't come roaring back next year as the still weak housing and vehicle markets and the troubled financial system will constrain the availability of credit to households and businesses," he said in a written interview.

"I do expect the U.S. economy to enjoy much stronger growth in 2011-12 as these impediments to growth fade and growth in the rest of the world improves and lifts U.S. exports," he explained.

Zandi believes that a bottom in the U.S. housing market is coming into view, but "the outlook critically depends on the success of the Obama administration's plan to help facilitate more mortgage loan modifications to quell the foreclosure crisis."

"Home sales and housing construction have stabilized and I expect house prices to stop falling by spring 2010. A meaningful improvement in the housing market will not occur until 2011," said the economist.

Speaking of the record-high budget deficits in the U.S., Zandi said running large deficits has been necessary to quell the financial and economic crisis, but the U.S. policymakers must rein deficits once the crisis ends.

According to the Obama administration, the U.S. federal budget deficit would rise to an all-time high of 1.84 trillion dollars in the current fiscal year, about four times the record set last year. The deficit will total 7.1 trillion dollars from 2010 to 2019.

Zandi argues the key to rein the deficit will be healthcare reform as this is necessary to lower the growth in future health care costs. If the growth continues, health care costs will result in ballooning costs for the massive Medicare and Medicaid programs.

As the GAO noted in a report issued in 2007, the growth in health-related costs is a primary driver of the fiscal challenges facing the state and local government sector.

"This is why credible health care reform this year is so important," said Zandi,  Kazinform refers to Xinhuanet.

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