The Global Economy in 2010 and Outlook for 2011

Inline with expectations, the year 2010 ended with no major surprises. In advanced economies, the recovery was weak and incomplete. It was fueled by two unsustainable factors; inventory accumulation and fiscal stimulus. It was also creditless and jobless. Creditless because banks were reluctant to lend and the non-banking private sector was not keen to expand its borrowings or raise funds through fragile financial markets. Creditless recovery displayed weak economic growth as banking intermediation role was hindered. Additionally, through out 2010, the household sector was going into a correction process to improve saving habits in order to cut its debt burden. Although, savings are good for long-term growth, they are not the ideal consumer behavior during recovery periods. The combination of inefficient financial intermediation and low consumption demand led to a slow recovery that was hardly strong enough to reduce the jobless rate.

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