Dr Doom warns double-dip recession is on the cards

Economist Nouriel Roubini, known as Dr Doom, today warned that the economy could dive back into recession following a small period of growth.

"The recovery is likely to be anaemic and below trend and there is a big risk of a double-dip recession," he said.

Roubini, professor of economics at the Stern Business School in New York, forecast "a couple of quarters of rapid growth". But he said growth will then be muted at best for at least a couple of years. He wrote in the Financial Times: "There are now two reasons why there is risking risk of a double-dip W-shaped recession.

"If policymakers take large fiscal deficits seriously and raise taxes, cut spending and mop up excess liquidity soon, they would undermine recovery and tip the economy back into stagdeflation.

"But if they maintain large budget deficits, bond-market vigilantes will punish policymakers. Then, inflationary expectations will increase, long-term government bond yields would rise and borrowing rates will go up sharply, leading to stagflation."