Uncertain oil supply may become new risk for world economy: Standard & Poor's

The uncertainty of energy supplies, in particular crude oil, might become a new risk for the world economy, a leading economist said Thursday.

"We think there is enough strength to keep the recovery going. However, it's still fragile. There are things that can go wrong," said David Wyss, global chief economist of Standard & Poor's, a world leading rating agency.

"Leading possibilities right now would be another oil price spike, perhaps caused by geopolitical stress in the Middle East, or that we could get another freeze in financial markets, perhaps triggered by what's happening in South Europe," Wyss said during a roundtable meeting with Chinese news media.

Wyss said there are some signals showing that the world economy is cooling off a bit, but he thinks the problem is just a moderate correction.

"I do not see a double-dip recession," he said.

Growth prospects for China's economy remains robust but some softening was expected in the coming quarter, largely on the back of problems in Europe, and stimulus measures in some developed economies, Wyss said.

China, the world's third largest economy, expanded 10.3 percent year on year in the second quarter this year, slower than the previous two quarters, but the cooling down was considered good for economic restructuring.

Meanwhile, David Peers, the global head of S&P's Sovereign and International Public Finance, said the impact of the euro zone crisis on China will be manageable.

"The first link is trade. Sluggish economic growth in the euro zone over the medium term suggests China's exports to the euro zone are likely to grow slowly," Peers said.

Secondly, he said, Chinese banks have links with European banks, but China's exposure to the credit risks of those institutions and euro zone sovereigns is relatively modest.

Wyss believed that China would face key constraints for a long time, including education and capital.

"China needs high saving rates to create capital and improve educational systems and graduation rates to sustain the country's current growth," Wyss said in a brief press release after the meeting.

The economist predicted that the euro could be appreciated against the U.S. dollar by the end of this year, because the euro zone's situation is becoming stable.

In addition, he said, some economies that hold big foreign reserves would buy back after heavy selling of the single currency during the recent sovereign debt crisis.

"On the other hand, the United States is still struggling from a huge trade deficit," Wyss said.
(Source:xinhua)