Risks to the world economy remain to the downside and include sharply weaker global growth and a sudden change to expectations regarding the U.S. Federal Reserve’s interest rate path, Societe Generale warned on Tuesday.
The French bank also said there was still a 30 percent chance of an economic “hard landing” for China, in its quarterly economic outlook.
“The potential for policy errors in China is substantial, and all the more so since a new bubble appears to be building in the property market,” Societe Generale analysts, led by Patrick Legland and Michala Marcussen, said in the report.
“The authorities are clearly keen to start recognizing and tackling the mountain of non-performing loans. The approach will be one of trial and error, with the downside risks implied in the name.”
A sharper-than-expected deceleration in the world’s second-largest economy could reverberate around the world. SocGen termed it a “black swan” — a metaphor for surprise events that severely affect the world.
The bank forecasts China’s economy will grow by 6.5 percent in this year, in line with consensus estimates.