Even when the dust finally settles from the global financial crisis, we doubt that the world will return to the high growth rates achieved before 2008. Slower expansion of the labour force, the lingering effects of the crisis itself and the problems in the euro-zone will hold back recovery in advanced economies. Key emerging economies, including China, will also grow more slowly. In some respects, more moderate growth may be helpful. The slowdown in China will reduce the risk of a future “hard landing” and contribute to narrower global imbalances. It may also help to bring down commodity prices. However, for countries with high public and private sector debt burdens, slower trend growth will make deleveraging more difficult to achieve.
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