The Implications Of The Financial Crisis For Global Growth

摘要

The current state of financial markets poses a serious downside risk to growth in the major economies, which are already in the midst of a significant cyclical downturn. The case for the global authorities to engage in the kind of major surgery now being proposed is a strong one - even if the fiscal cost proves very substantial. Indeed, it looks inevitable that the major legacies of the current downturn will be sharp increases in public debt in many of the major economies, and a banking sector that looks very different from that we have become accustomed to in recent years - a sector likely to prove much less dynamic as a growth factor over the medium term. But this may be the only way to end the crisis of confidence that is currently paralysing financial markets and threatening a deep and protracted recession. Even if the currently proposed policies are implemented effectively, the events of recent weeks have had a significant negative impact on the growth outlook for 2009 and 2010.