The global imbalances that were behind the financial crisis are still present. Some countries will be struggling with large fiscal deficits for some considerable time. However, it is conceivable that the imbalances will gradually diminish. Emerging economies are facing a period of considerable investment in welfare and infrastructure development. Households and firms will be able to reduce saving as welfare schemes and national capital markets are developed. In addition, many countries with an ageing population may find that an increasing number will have to draw down their wealth, resulting in a decrease in total saving. For European countries and the US, there is no doubt: deficits must be reduced and savings increased. Energy and commodity prices Let me move on to how the changes in the world economy have influenced commodity demand and commodity prices. Chart: Real prices for metals, food and oil The price of oil is now around USD 115 per barrel. Prices for other commodities such as metals and food are also high. A weak dollar, low interest rates and an ample supply of liquidity may have contributed to the rise in prices. We have also recently seen that prices are being pushed up by political unrest in North Africa and the Middle East. Nonetheless, strong growth in emerging economies and supply-side conditions have been the dominant factors in developments since the early 2000s. From 2000 to 2009 emerging economies accounted for 100 per cent of the growth in global consumption of primary energy sources.

This trend has leveraged on the respective comparative advantages in countries of the region. Malaysia 's distinct capabilities in a wide number of areas has increased its participation in this process. In addition, increased economic integration following the rise of intra-regional trade and investment has brought mutually reinforcing benefits in terms of the expanding regional opportunities. The strengthened corporate sector has also led to increased direct investment abroad by Malaysian companies. Going forward, developments in the Malaysian economy will also benefit from the Ninth Malaysian Plan. A major strength of the Malaysian economy has been its economic flexibility. Significant changes in the structure of the economy continues to take place. The manufacturing sector has continued to move up the value chain while the services sector has gained increasing prominence, with its share of GDP rising from 45% in 1995 to almost 60% today. The role of private consumption in the economy has also been enhanced, supported by steadily rising incomes, low unemployment, and access to the financial system. Of importance is the recovery of investment activity. In addition, the small and medium-sized enterprises (SMEs) have increased their role in the domestic economy. New areas of growth are also emerging, ranging from the shared services and outsourcing industry to agrobusiness, biotechnology and Islamic finance. The flexibility of the economy to continually adjust to new areas of activity has been an important factor contributing to the dynamism of the economy. About a year ago, Malaysia took the opportunity to transition into a more flexible exchange rate regime.