The worst of the global financial crisis may be over, but the longer term challenge is the creation of balanced and sustainable global economic growth when government fiscal support is withdrawn. This message of cautious optimism resonates from over 350 business leaders in the APEC region, based on a joint survey by PricewaterhouseCoopers (PwC) and the APEC CEO Summit 2009 organising committee.
The survey sought respondents' views on the impact of the financial crisis and the role of APEC in rebuilding the global economy. The survey findings identified Rebalance, Connectedness and Sustainability as the agenda of the global economy for the next few years.
Over half (58%) of respondents believe that the world has seen the worst of the crisis. Only 28% of all respondents agree or strongly agree with the statement "unemployment will revert to pre-crisis levels in the next 12 months."
Pessimism surrounding unemployment is highest in the Americas (21%) and the lowest in North East Asia with 31% agreeing or strongly agreeing with the statement. This would imply a general sentiment that recovery will be long-drawn and unemployment is expected to persist.
"APEC is at the forefront of change and many of its economies have weathered the financial crisis well. They will play a critical role in bringing about balanced and sustainable growth as the world emerges from the shadows of this unprecedented crisis. While the outlook remains cautious, there is a sense of hope and openness to change in the post-crisis climate," says Dennis M. Nally, Chairman of PricewaterhouseCoopers International, who spoke at the APEC CEO Summit in Singapore.
Reworking the global order
The crisis may have hastened a tectonic shift in global economic power. While emerging economies witnessed a slower pace of growth owing to shrinking export markets, most of their financial systems escaped the crisis relatively unscathed and in fact, some of them offer a more stable and robust economic environment than certain developed economies. This is borne out in the survey where 37% of respondents believe that it will take two to three years for the global economy to recover fully. Within regions, 45% of respondents from the Americas believe that global economic recovery will take two or three years.
"The size of many emerging economies suggests that they will become the drivers of global economic growth in the coming years,” notes Silas Yang, Executive Chairman and Senior Partner, PwC China.
Yang says that, as the biggest emerging market, China's strong economic recovery is mainly driven by massive fiscal investment and rising domestic consumption spurred by a series of government incentives and subsidies. “To sustain this growth rate in the long term, China will have to reduce its over reliance on exports and nurture the domestic consumption market by encouraging its people to spend more," remarks Yang.
Restructuring the global financial sector
Almost all respondents (97%) recognise that US leadership remains critical in overhauling the global financial architecture. This view is shared by almost all respondents from the Americas (96%) who expect the US to continue to play a role in the global financial arena, in particular, to enhance the working of the International Monetary Fund (IMF) by giving voice to other economies in the world, setting standards in global financial regulation and streamline its own domestic regulatory systems. In the short term, the role of the US dollar as the de-facto reserve currency is unlikely to change. However, 47% of respondents expect an alternative currency in the next 10 years.
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