We know that social exclusion and unemployment, especially among young people, are very painful and that the challenges ahead are formidable. We should not let the hopes and aspirations of the people who took to the street go unfulfilled. We must strive to ensure that the people of the Arab countries in transition have the opportunity for a fairer and more prosperous future.
Policymakers and analysts in the region should be vigilant about rapidly growing mortgage credit and home prices because, as we know too well, they can create financial instability. Latin America has a long history of credit booms gone wrong and experience shows that while credit-driven asset price bubbles build slowly they can sour quickly. But then again, Latin America has a large housing deficit, so construction activity should be catching up as living standards improve and mortgage credit deepens from its very low base. A proper assessment of the situation is hindered by the limited and weak information available for the real estate sector in Latin America.
The debate on austerity vs. growth has gained in intensity, as countries in Europe and elsewhere struggle with low growth, high debt, and rising unemployment. In essence, policymakers are being asked to tackle a continuation of the worst crisis since the Great Depression. This would be no easy task under any circumstances. But it is made considerably harder by the fact that a number of countries need to engage in fiscal consolidation simultaneously. Complicating the picture further is the fact that monetary policy in most advanced economies is approaching the limits of what it technically can do to stimulate activity, while global growth remains weak.
The crisis has harmed growth, increased unemployment, and left a large number of people less protected. We are now seeing some signs of stabilization. Most countries are reducing their deficits and even if debt ratios are still rising, the return back to fiscal health has begun.