A Must Read; Krugman says world avoided second Great Depression

Krugman says world avoided second Great Depression but real recovery will take time.

By Eileen Ng, Associated Press Writer

KUALA LUMPUR, Malaysia (AP) — Aggressive stimulus spending by governments helped the world avoid a second Great Depression but full economic recovery will take two years or more, Nobel Prize-winning economist Paul Krugman said Monday.

Krugman said the worst of the global crisis was over with economic and exports growth showing signs of stabilization. Still, recovery was likely to be “disappointing” as government spending wasn’t sustainable in the long-run and unemployment rate still lagging behind, he told a two-day world capital markets conference here.

There isn’t likely to be any “Phoenix-like” recovery such as in the 1997-98 Asian financial crisis, where the economies expanded dramatically, led by a sharp rebound in exports, he said.

“We have managed to avoid a second Great Depression … but full recovery is at least two years and probably more,” Krugman said.

Asia is likely to see a faster rebound, than the U.S. and Europe, partly driven by the recovery in manufacturing exports, he said.

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