While several of the advanced economies will continue to be weighed down by weak growth as the slow process of financial resolution continues and the high unemployment delays the recovery process, emerging economies, in general, and Asia in particular, have shown a high degree of resilience. The financial intermediation in most emerging economies have remained undisrupted and have continued to support the domestic economic activity. While the emerging economies are expected to lead the recovery process, there needs to be a reassessment of the strategies for future growth. Over reliance on export orientation to the traditional markets would increase the vulnerability to external developments. Going forward, emerging economies now need to achieve a greater balance between external-oriented development strategies and the strengthening of our domestic demand. In Asia, domestic demand in most emerging economies are well supported by the positive demographic structure, the rising income levels, and the broadening of affluence. This is reinforced by the low levels of unemployment and inflation, and the continued access to financing. This changing spending patterns in Asia have already led to the rise of a modern retail sector across our region. In addition, high savings rates exceeding 30% of Gross National Product for most countries in Asia, raises the potential for long-term sustainability of domestic consumption spending. This trend has also supported increased intra-regional trade, investment and tourism that is reinforcing the growth prospects in the region. The evolving trends and encouraging growth prospects in our respective regions present tremendous opportunities for the insurance and reinsurance industry.

Developments in other countries are just as important for the krone as developments in the Norwegian economy. Capital flows freely and flows can change rapidly. This can spill over to exchange rates and interest rates as well as output and employment. Currency swings are driven by cross-border capital movements. Capital flows were heavily influenced by investor focus on stock market returns until the downturn began. In the US, equity prices almost trebled between 1995 and 2000. Stock markets in other countries followed suit. The decline was amplified after the downturn in the global economy deepened as a result of terror and fears of war. Investors sought to avert the risk in the stock market. Capital inflows into the stock market resulted in a strong dollar. However, expectations concerning corporate earnings were higher than later proved to be warranted. When expectations were lowered, equity prices fell. Demand for bonds increased, resulting in low long-term interest rates. BIS Review 14/2003  1  In response to heightened uncertainty and fears of war, traditional safe havens for capital, such as the Swiss franc and gold, have become increasingly attractive. The Swiss franc appreciated after the terrorist attacks on 11 September 2001 and towards the end of last year. Gold prices moved up sharply after UN Security Council Resolution 1441 was adopted in November last year. Oil prices fell markedly after 11 September 2001, but have since risen. Fears of war in Iraq have increased the uncertainty surrounding global oil supplies.