Yongfu Cao; Wendy Dobson; Yiping Huang; Peter A. Petri; Michael Plummer; Shinji Takagi
Abstract: The recovery of the Asia-Pacific from the global economic crisis of 2008-09 is underway but incomplete. Despite encouraging progress, major risks remain, ranging from slow growth and persistent unemployment to reemerging global imbalances and renewed financial volatility. The policies that stopped the economic freefall—massive stimulus and financial bailout packages— were urgent, relatively easy to sell politically, and to a large extent forced by circumstances. This report argues that sustained recovery now requires tackling different problems, including international imbalances among the United States, China, and other economies. U.S. consumers are not likely to drive world demand in the medium term, and the slack will have to be taken up in part by Asian consumption and investment. The early policy responses, successful as they were in averting a larger calamity, were not designed to address longer-term issues, and some are even counterproductive from that perspective.