There is an urgent need to rebalance policy in order to shift to a more robust and sustainable global expansion and address accumulated vulnerabilities, the BIS writes in its main economic review of the year. It calls for prudential, fiscal and structural policies to play a greater role.
Introduction: When the future becomes today
Judged by standard benchmarks, the global economy is not doing as badly as the rhetoric sometimes suggests. Global growth continues to disappoint expectations but is in line with pre-crisis historical averages, and unemployment continues to decline. Less comforting is the longer-term context – a “risky trinity” of conditions: productivity growth that is unusually low, global debt levels that are historically high, and room for policy manoeuvre that is remarkably narrow. A key sign of these discomforting conditions is the persistence of exceptionally low interest rates, which have actually fallen further since last year.
The views expressed here do not necessarily reflect the views of the BIS member central banks.