Output in several of the economies of East Asia fell very sharply at the turn of the year, but those countries are now leading the global recovery. This points to a strengthening of domestic demand in these largely export-oriented economies, and our forecast shows some rebalancing of global demand. This will allow the large current account surpluses in China and Japan to narrow over the next few years, and help sustain the recovery in the rest of the world. The Japanese current account is expected to approach balance by 2013, from a surplus of nearly 5 per cent of GDP in 2007, while the Chinese currrent account surplus is expected to narrow to about 8 per cent of GDP from a peak of over 12 per cent in 2007.