In this Center for Geoeconomic Studies Working Paper, Steven Dunaway argues that the outlook for recovery and growth in the world economy at this juncture appears rather gloomy. Lasting adjustment in imbalances is taking place only in the United States, and this will continue over the medium term. The result will be significantly slower growth in U.S. demand in the next several years. Hence, the main factor determining growth in the world economy will be whether other sources of demand will arise to take up the slack left by slower U.S. growth. At the moment, prospects do not look good. None of the other major economies appear inclined to make the necessary changes in policies to deal with their imbalances and raise their demand. Therefore, the world economy faces the prospect of a prolonged period of slower growth and greater volatility than it has known for several decades.