World Economic Situation and Prospects 2012

Following two years of anaemic and uneven recovery from the global financial crisis, the world economy is teetering on the brink of another major downturn. Output growth has already slowed considerably during 2011, especially in the developed countries. the global crisis and the recent financial turmoil have highlighted the need for very large liquidity buffers to deal with sudden, large capital market shocks. Many developing countries have continued to accumulate vast amounts of reserves($1.1 trillion in 2011) as a form of self-protection. But doing so comes with high opportunity costs and is contributing to the problem of the global imbalances. A better pooling of reserves, regionally and internationally, could reduce such costs to individual countries and could also form a basis for more reliable emergency financing and the establishment of an international lender-of-last-resort mechanism. Broadening existing SDR arrangements could form part of such new arrangements. http://www.un.org/en/development/desa/policy/wesp/wesp_current/2012wesp_prerel.pdf

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