Challenges for the world economy - implications for Arab economies

Keynote speech by Mr Agustín Carstens, General Manager of the BIS, at the 42nd Annual Meeting of the Council of Arab Central Banks and Monetary Authorities Governors, Amman, 17 September 2018.

A decade after the global financial crisis, the global economy is now solidly expanding. Yet, this expansion is by no means universal. Arab countries in particular have struggled to cope with large swings in energy prices, relying primarily on fiscal policy to stabilise their economies. But this will prove more difficult as the prospect of monetary policy normalisation looms large. Meanwhile, trade tensions could derail world growth and lower energy prices. As borrowing costs rise, the use of fiscal policy as a shock absorber will become more difficult. Hence, there is no alternative to building resilience. In addition to increasing an economy's diversification and flexibility while reducing its vulnerabilities, expanded external cushions such as international reserves or access to external liquidity assistance could play an important part.