Nov 06, 2015 (LBO) – Sri Lankan-born economist Howard Nicholas on Thursday warned that the world will have to face a recession by next year.
Speaking at the 36th National Conference of Chartered Accountants in Colombo Nicholas, who is a senior lecturer of Rotterdam Erasmus University, argued the world is now near the bottom of a long business cycle.
A business cycle is basically defined in terms of periods of expansion or recession.
In technical terms a recession can be defined as two quarters of negative growth and depression is commonly defined as a more severe version of a recession.
There are three types of cycles and the K wave represents the long business cycle referred by Dr Nicholas.
“Most analysts think we are near the bottom and we are about to begin a new upward pace of the cycle. I tend to agree,” Nicholas said.
“Some analysts say that we already passed the bottom and we are going upwards now; I disagree.”
Nicholas whose views are widely respected among economists said one important phenomena identified with the long cycle is the dominant economic power that had to change near the bottom of the long cycle.
“In 1930’s we see the emergence of the United States as the world dominant power. The question is; are we now witnessing the next dominant power in the world.” he questioned.
Nicholas who denounces classical economics as being unrealistic said the global economic power has now shifted from US and Europe to East Asia.
“The share of global GDP in US and Europe has shifted to East Asia. Companies are seeking to relocate its businesses even from China to other East Asians countries.” he said.