JERUSALEM (Reuters) - The economy is unlikely to return to recession provided there are no shocks on oil prices, U.S. housing or mishandling of the European debt crisis, former White House aide Larry Summers said on Wednesday.
Speaking at a conference in Jerusalem, Summers -- a Harvard professor and former Treasury secretary under President Bill Clinton -- said the odds were low there would be a double dip recession.
“The expectation is that U.S. growth will continue at 2 to 3 percent the rest of the year,” said Summers, adding global growth would be faster due to strong emerging markets.
The ex-White House economist said shocks to commodities prices, particularly oil due to unrest in the Middle East, could hurt growth prospects.
At the same time, there were also risks to the economy in the event of a mishandling of the European debt crisis and if the U.S. housing market stays weak, Summers said.
He also compared China to Japan in the 1980s, saying the country had a managed currency, low productivity, easy money and inflated assets.
While China is not expected to follow the collapse of Japan’s economy, Summers said it was “a possibility.”
“If these became a reality in a major way, they could impact on the totality of the global economy,” he said. “China, U.S. housing, commodities and mishandling of Europe are four things I would watch against a forecast of continued growth.”
Summers said that while the center of gravity of the global economy is shifting eastward, the United States will remain a global economic power.
“When the world’s financial markets were in distress the assets people rushed into were U.S. dollar assets in general and U.S. Treasury bonds in particular,” he said.
That, along with massive government intervention to rescue the banking and auto industries, allowed the United States to recover faster than other countries.
“This was the economic equivalent of the Cuban Missile Crisis,” Summers said.
Still, U.S. “growth has not been as rapid as hoped. It’s slower than I and other observers had expected six, nine months ago,” he said. “But it is growing faster than most of the industrial world.”
“It’s not likely that the next few years will be the most rapid growth we have ever seen. Overhang of excessive levels or capital and excessive debt make that unlikely.”
Reporting by Steven Scheer, Editing by Chizu Nomiyama