Rebalancing growth

24 June 2012

Both advanced and emerging market economies face structural challenges. Sectoral misallocations that built up during the boom, coupled with high levels of household and corporate debt, continue to hobble growth in some advanced economies. These countries must move to repair balance sheets as they facilitate the rebalancing of resources across sectors. Meanwhile, a number of other countries, including many emerging market economies, face the risk of experiencing their own version of the recent boom and bust cycle. Their rebalancing requires shifting from credit expansion and exports towards internal sources of growth, especially as growth models that mainly rely on exports are likely to be less effective than in the past.