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are in a much better financial situation than OECD countries and are expected to
continue to grow briskly, their growth prospects in a globalized world are not divorced
completely from those of advanced economies and while they will increasingly
act as motors of world growth, the process may not be smooth.
Finally, the much-heralded measures to restructure the global financial system are
still a work-in-progress, given the complexity of the issues involved and the controversial
nature of some of the proposed reforms. It begs the question: will the
measures be sufficient to make the world safe (or safer) from new upheavals? So
far, the process has been slow, both at the national and multilateral level, although
some progress has been made to improve transparency and moderate reforms are
expected to be implemented in the course of the next few years.
In the US, the Dodd-Frank Wall Street Reform and Consumer Protection Act has
gone some way to restrict the ability of banks under federal insurance from engaging
in proprietary trading. The EU has adopted a new financial supervisory structure,
but the main thrust is focused on harmonizing national rules and advancing
transparency. At the multilateral level, the emerging compromise on the Basel 3
banks’ capital requirements and liquidity standards, to be presented to the G-20
Leaders’ Summit in Seoul in November 2010, appears to be a watered-down version
of initially envisaged reforms. However, this cautious approach to financial
reform may itself be a reflection of widespread fears of derailing an already fragile
recovery in the real economy.
It is clear that the G-20, which led the rescue of the world economy, has largely
succeeded in steering the world away from the storm into quieter waters, but the
global economic recovery is still far from secure.
global crisis. The International Monetary Fund (IMF), for example, estimates that
debt ratios are likely to turn out to be the largest since World War II. 11 They emphasize
that, while a too rapid withdrawal of the fiscal stimuli could add serious downside
risk to the recovery, there are also serious concerns over sustainability of the debt. It is
clearly too early to judge how this will play out.
Long-term economic growth
Demographics
For long-term economic growth potential, as well as the prospects for future energy
needs, it is essential to consider demographic trends. While the world’s population is
clearly set to grow, albeit at slowing rates, growth patterns will be very different across