General Manager's speech: Stepping out of the shadow of the crisis: three transitions for the world economy

Speech delivered by Mr Jaime Caruana, General Manager of the BIS, on the occasion of the Bank's Annual General Meeting, Basel, 29 June 2014.

Good morning, ladies and gentlemen

This year's Annual Report offers our views on current challenges and aims to examine policies that might help us step out of the long shadow of the crisis. Our approach is to seek a long-term perspective with a view to shedding light on both the build-up of financial imbalances pre-crisis and their lasting consequences.

In my remarks, I will focus on my own observations on the Annual Report. Claudio Borio, Head of the BIS's Monetary and Economic Department, and Hyun Song Shin, Economic Adviser and Head of Research, will elaborate afterwards on some specific points.

Seven years on, the Great Financial Crisis still casts this long shadow on the world economy. The good news is that the global economy is healing and global growth has picked up during the past year. Reforms have taken hold, if unevenly. The recovery in the advanced economies has broadened. The euro area has eventually emerged from recession, while the slowdown in emerging market economies (EMEs) seems to have abated. The consensus expectation is for global growth to gradually return to pre-crisis rates (Graph 1).

The less good news is that challenges continue to be serious and new risks are emerging. By historical standards, the upswing has disappointed. But this should not be surprising. Consumers, firms and banks in crisis-hit economies are still repairing their balance sheets and grappling with an overburden of debt. Private sector deleveraging is most advanced in the United States; in other countries, including large tracts of the euro area, it is still very much work in progress. During the boom, resources were misallocated on a huge scale, and it will take time to move them to new and more productive uses. Meanwhile, a number of EMEs have moved into the late stage of their own financial booms. While these booms have helped to extricate the global economy from the Great Recession, they are now confronting the EMEs with a range of economic risks. And these risks cannot be altogether offset by the additional room for policy manoeuvre that the EMEs have won for themselves over the last few years.

The financial cycle, the debt trap and secular stagnation
Presentation by Claudio Borio, Head of the Monetary and Economic Department

The changing face of financial intermediation
Presentation by Hyun Song Shin, Economic Adviser and Head of Research