Clouds on the Horizon of the Global Economy: The Importance of Taking a Long View

Claudio Borio

Economia Internazionale / International Economics, 2026, vol. 79, issue 1, 37-50

Abstract: From a macro-financial perspective, clouds are gathering on the horizon of the global economy due to the convergence of two powerful forces. On the one hand, a financial cycle has lost momentum while the regulatory cycle is pushing to weaken the financial system, raising the risk of financial instability. On the other hand, an inexorable deterioration in public finances is undermining their sustainability and represents the biggest medium- and long-term risk to monetary, financial and macroeconomic stability. In the background, political and geopolitical developments exacerbate these challenges. Finding adequate solutions requires adopting a long-term view, regaining safety margins and abandoning the “growth illusion” – the view that protracted expansionary monetary and fiscal policy can raise sustainable growth.

Nuvole all’orizzonte dell’economia mondiale: l’importanza di una veduta lunga

In un’ottica macro-finanziaria, nubi si addensano all’orizzonte dell’economia mondiale a causa della convergenza di due potenti forze. Da una parte, un ciclo finanziario ha perso slancio mentre il ciclo regolamentare spinge verso un indebolimento del sistema finanziario, aumentando il rischio di instabilità finanziaria. Dall’altra parte, un inesorabile deterioramento delle finanze pubbliche ne compromette la sostenibilità e rappresenta il principale rischio di medio e lungo periodo per la stabilità monetaria, finanziaria e macroeconomica. Sullo sfondo, gli sviluppi politici e geopolitici aggravano ulteriormente queste sfide. Trovare soluzioni adeguate richiede l’adozione di una “veduta lunga”, il recupero di “margini di sicurezza” e l’abbandono della “illusione della crescita” – l’idea secondo cui politiche monetarie e fiscali espansive protratte nel tempo possano innalzare la crescita sostenibile.

Keywords: Financial Cycle; Regulatory Cycle; Public Finances; Monetary Policy; Long View; Safety Margins; Growth Illusion (search for similar items in EconPapers)
JEL-codes: E30 E44 E50 G20 G28 H60 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:ris:ecoint:022210

DOI: 10.65644/EIIE.079.01.0037

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