A year ago, the world economy fell into a deep recession. Now, happily, we see financial stabilisation and economic recovery. But we must not declare victory. The world could still make two mistakes: first, we might withdraw stimulus too soon; second, we might lose the opportunity for reform. We must avoid both dangers. That is the lesson I learnt at the annual meetings of the International Monetary Fund and World Bank in Istanbul. So where are we and where do we need to go? Think of this in terms of five 'r's: rescue; recovery; rebalancing; regulation; and reform.
The rescue was unprecedented in scale and scope. It had to be: the world economy went over a cliff. At the beginning of 2009, the annualised fall in a quarterly moving average of world industrial output reached 25 per cent (see chart). The fall in world trade was even more extreme.
