Towards more balanced growth: A greater role for domestic demand in development strategies

The global economy is still struggling to recover from the Great Recession of 2008–2009 resulting from busts in the housing and financial markets of the major developed countries. The examination of the current challenges for the global economy in chapter I of this Report indicates that these countries may have a long way to go to achieve a self-sustaining recovery. Meanwhile, a prolonged period of slow growth in these countries will mean continued sluggish demand and thus slower growth in their imports from developing and transition economies beyond the short term. Countercyclical macroeconomic policies might be able to compensate for resulting growth shortfalls for some time, but will eventually result in fiscal or balance-of-payments constraints unless they are followed by policies that adopt a more comprehensive and longer term perspective. This chapter discusses possible longer term policy options to support rapid and sustained economic growth in developing and transition economies, with a focus on the complementarity of external and domestic demand.

Related Subject(s): International Trade and Finance