American billionaire Elon Musk has said that there will be a global downturn if there is a major geopolitical crisis.
Musk, who is the owner of Tesla and SpaceX, said on the "Full Send" podcast this week as reported by RT on Saturday, that the United States was not headed into a “big recession,” but a mild downturn was possible.
“I don’t think we’re headed into a big recession. It could be a mild recession that lasts for a couple of years,” he said, reiterating the prediction he made earlier this week at the Tesla 2022 shareholders’ meeting, where he said the US is likely to see a “relatively mild recession” lasting for about 18 months.
On the podcast, Musk warned that a global recession was also possible. It would depend on the geopolitical situation and could be triggered by some kind of major geopolitical event, he said, referring to the situation between China and Taiwan.
“The thing that is hard to predict is… if there’s a war between China and Taiwan. That would send the world into recession. That’s a possibility – something like a big, big event,” he warned.
In the meantime, US House Speaker Nancy Pelosi left Chinese Taipei on Wednesday following a whirlwind visit that sent ripples across the world and prompted Beijing to hold military drills and issue hard-hitting statements against Washington.
The American economy has shrunk for the second consecutive quarter amid growing concern the country could be slipping into a recession, according to new federal data.
The Commerce Department data released last week showed American gross domestic product (GDP) shrinking between April and June, marking the second-straight quarter of economic contraction, The Hill reported.
The US Commerce Department’s first estimate of economic growth over the previous three months showed GDP falling at a yearly pace of 0.9 percent in the second quarter.
This means that the US economy would shrink by nearly 1 percent if the second quarter’s pace of growth lasted for an entire year.
“The US economy is struggling,” wrote Scott Hoyt, senior director at Moody’s Analytics.
“We now expect growth to struggling to reach potential both this year and next. However, we don’t believe the economy is in a recession,” he continued.
This comes after the IMF said on Tuesday that the United States has only a slim chance of avoiding an economic downturn given the many risks it faces.
"It's a very narrow path," IMF chief economist Pierre-Olivier Gourinchas said. "The current environment suggests that the likelihood that the US economy can avoid a recession is actually quite narrow,” AFP reported.
The economist warned that even a "small shock" could tip the US economy into recession.