This paper considers some of the main risks and opportunities currently facing the
world economy. Against a baseline forecast of October 2009, it first discusses a number
of policy mistakes or policy failures that could lead to even worse outcomes than
currently envisaged. It then describes the policy choices that would help to support
global demand on a more sustainable basis while rebalancing its regional elements and
therefore current accounts. Using the United States as an example, the paper also
provides estimates of the long-term damage from protracted excessive fiscal deficits,
and of the benefits from significant fiscal consolidation.