>The recovery continues while uncertainties still linger...

■ The economic climate seems to be stabilising. In developed countries a partial recovery is currently underway. This is a recovery because indicators show that growth has resumed and probably on a lasting basis. But its partial characteristics can be seen in several areas: bank lending has not yet recovered and consumer spending and construction investment are
lacklustre. In emerging countries the prospects are more flattering. GDP growth is forecast to run at around 6% this year and next. For most of these countries inflation is under control, policymakers seek to tighten monetary settings in line with price trends and government budgets are in relatively good shape—all in all, a reassuring and attractive picture.

■ Our favourable outlook will not prevent the business community from remaining a little cautious. The feeling of lack a of clarity will not disappear easily. There are three main reasons. The crisis has taught us that the market did not always know better than everyone else. This means that a sharp rise in asset prices would not necessarily lead to a greater preference for spending at the expense of saving. However, it is feared that the contrary (falling asset prices) would lead to a net loss of confidence and a downward revision of purchasing intentions

■ Uncertainty over the political/regulatory landscape is dampening ’animal spirits’ that often animate business investment decisions. For example, the financial services sector still does not know what lies ahead in terms of regulatory reform and that will affect its profitability. Other sectors are also confronted by the same kind of uncertainty. For example, in the US firms face uncertainty over how much they will pay for their employees’ health care costs given recent health care reform measures.

■ The post-crisis period will demand a great deal from economic policy. In developed countries, the aim is to simultaneously normalise the very accommodative monetary policy stance that the crisis forced upon us and to nurture economic growth that will initially be on the weak side. In emerging countries the aim is to stop markets spinning out of control and to consolidate the culture of stability that has gradually grown up over the past decade. Much is at stake, and knotty questions will be raised, as to the timetable (when to swing into action?), the preferred tools and the degree to which they should be applied. The markets will be attentive to the credibility and expected effectiveness of the measures undertaken.

To read the full report: MACRO PROSPECTS