The global economy faces a 40 percent chance of plunging back into recession within the next couple of years and growth will remain weak, Stephen Roach, chairman, Asia of Morgan Stanley, told CNBC Friday.
What's Next?
"I think global growth is going to be anemic and I'd put a 40 percent chance on a double dip at some point in the next couple of years," Roach said.
"Unfortunately, putting in a bottom tells you nothing about the character of the recovery and I think that there are many stiff headwinds that are going to restrain the global expansion over the next few years," he said.
The economy will have to overcome further writedowns of toxic assets in the banking sector and "chronic weakness" in demand from the American consumer, according to Roach.
Imbalances on the "supply side courtesy of an unbalanced Asian economy" will also hamper the economic recovery, he said.
The global economic problems are not the sole responsibly of the banks, Roach said in the wake of tough new plans for the sector from U.S. President Barack Obama.
"The banks didn't do it alone. There was a sense of shared responsibility here from central banks, regulators, rating agencies and yes, even the brilliant political overseers," he said.
Obama's plans could see Wall Street banks ditch their private equity operations in an attempt to reduce the amount of risk within the sector.
Roach said that politicians were now "preaching from a very self-righteous platform that they had the keys to the new post-crisis kingdom."
The "asymmetrical monetary policies" of central banks are to blame for the economic woes, Marc Faber, author and publisher of the "Gloom, Boom & Doom Report," told CNBC.
- Watch the interview with Roach and Faber above.
"In a boom they never tightened sufficiently and in a bust they just flooded the system with liquidity," Faber said.
Roach agreed that the central bank policies added to the extent of the crisis.
The Asian banking system did not have the same direct exposure to toxic debt that Western banks did, Roach said. But Asia did follow the West's lead by pumping the economy with excess liquidity, he pointed out.
"The disconnect comes when you see relatively strong recoveries in Asia and yet you still see highly accommodative monetary policies," he said.
