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Long-term headwinds to restrain US growth, says HSBC expert

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Longer-term challenges including a stagnant housing market and US government budget cutbacks will restrain economic growth over the next year.

That is the view of Ryan Wang, a US economist at HSBC based in New York, who was visiting the Island this week to meet with the bank’s clients and staff and give his outlook on the economy.

Mr Wang said that the US economy had been in recovery for the past two years but it didn’t feel like that for many people due to the labour market continuing to be depressed with a headline figure of nine percent unemployment.

“I think there’s going to be some longer-term challenges that are going to keep economic growth pretty moderate for the next year,” he said.

“The US GDP growth is around 1.8 percent and I would expect to see a similar growth rate next year.”

Describing the sovereign debt crisis in Europe as probably the “biggest global economic risk” currently facing the world, Mr Wang said that the role banks played in economic growth was critical and concerns over sovereign debt and the banking sector had become intertwined thus the risk of dislocation in the financial markets was heightened with the fear that it would spread to the world economy.

And with Europe entering a mild recession and the US and Japan both struggling to achieve more than two percent growth, all eyes had turned to the emerging markets which were reporting more favourable rates above six percent, he said, however the slowdown in the global economy over the past four to five months was having an impact on the likes of China too whose fiscal authorities were trying to gain a tighter control on credit.

Mr Wang said that there was also a hangover from the financial crisis of 2008/09 and the subsequent recession as financial institutions dealt with a high number of delinquencies on mortgages and household debt which meant they were more reluctant to lend added to the volatility of the markets and a low interest rate environment which all contributed to the present economic woes.

Part of the motivation behind his Bermuda visit was the increased focus on the development of the economy and financial markets, particularly the slow rate of growth and its impact on clients’ portfolios..

“It’s part of an ongoing process and it’s important for us to find areas that will impact our customers and how we can best serve them with those resources,” he said.

“I think for a long time we had a sense that Bermuda had been somewhat insulated from the macro-economic effects that were impacting other parts of the world, but that is no longer the case, particularly given what has been happening in Europe and the US.

“Our challenge as a bank is to perform well when the markets are good and the economy is good but historically we have also done well when they are bad which shows our size and stability as an institution that people can rely on.”

Andrew Roberts, treasurer and head of global markets at HSBC Bank Bermuda, said that Mr Wang had been brought in as part of the bank’s move to provide its customers with better and more up-to-date information about the issues that affect them, in particular the current state of the US economy

Mr Wang, who works for HSBC Securities, a principle line of business for HSBC Holdings plc, is part of a global team of more than 30 economists based out of New York, London, Hong Kong, and other major financial centres.

As part of the North American team, he helps to formulate the bank’s view of the outlook for the US economy, including projections for growth, inflation, monetary policy and the direction of interest rates.

Mr Wang, who has been with the bank for more than 10 years, has also written about issues such as the budget challenges facing state and local governments, prospects for the US housing market, and the outlook for the unemployment rate.

He meets regularly with HSBC’s institutional client base, ranging from companies, central banks and money managers to hedge funds and large corporations.

Ryan Wang, US economist at HSBC (Photo by Mark Tatem)
Ryan Wang, US economist at HSBC (Photo by Mark Tatem)

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Published November 29, 2011 at 1:00 am (Updated November 29, 2011 at 8:23 am)

Long-term headwinds to restrain US growth, says HSBC expert

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