COPING WITH CRISIS

Though the global economy survived the financial turmoil of 2008, governments need to do more to come out of the woods

The author is an associate researcher with the China Institutes of Contemporary International Relations

hough a decade has passed since the 2008 global financial crisis, the world has not fully emerged from its shadow. Instead of aiding the weak economy to recover, the policies adopted by Western countries have created new hidden perils and sowed the seeds for another financial crisis.

Worse still, the domino effect of the 2008 global crisis is still alive and is affecting emerging markets and developing economies, resulting in a protracted downturn in the world economy. The economy shortly rebounded in 2009, then entered a period of slow growth dubbed a “new mediocre” by International Monetary Fund (IMF) chief Christine Lagarde, with the growth rate stuck at 3.5 percent.

In 2017, it rebounded from recession again, with an actual growth of 3.76 percent. The IMF expects global growth to tick up to 3.9 percent this year and next. But despite the upswing, the favorable conditions will not last for long, and the growth would inevitably bend toward a weaker longer-term level. In fact, the growth in recent years benefited mainly from stimulus policies; the cornerstone of economic endogenous growth is still fragile.

Lurking threats

The 2008 financial crisis began in the United States. The subprime mortgage crisis (2007-09) which originated on Wall Street swept the world and developed into a full-blown international banking crisis with the collapse of many financial giants such as Lehman Brothers, one of the largest investment banks in the United States.

Then came the European debt crisis climax in 2010. It was not until August this year that the EU announced the conclusion