As I mentioned earlier, during 1999 and early this year a number of observers saw rising share prices as a strong reason why the Swedish economy might become overheated. At the Riksbank we were more inclined to wait and see. There is no reason now to adopt a different view and exaggerate the risks of the share price fall. Consumption is being sustained in the first place by a strong development of income that stems from increased employment, a good increase in real wages and a fiscal stance that is less restrictive than before. There is some cause for concern in the present round of wage negotiations. In a sense, that is inevitably the case when many settlements are being concluded simultaneously and the wage share is approximately two-thirds of the economy. That means that no other single factor is anything like as important as the wage trend for the path of the Swedish economy in the coming years. The picture of the negotiations that are now beginning is mixed. The outcome to date has been a positive surprise. It also looks as though the negotiating parties are formulating their bids on the basis of the inflation target. Moreover, the available picture of future wage expectations looks relatively good (Chart 3). Here we see the wage outcome, wage expectations and unfilled job vacancies. It is evidently becoming increasingly difficult to find the right people for the jobs that are advertised. This presumably makes the risk of wage drift greater than in previous years.
Post-September 11, Middle Eastern countries have started to look East to lessen their reliance on the West for management, science and technology, education, governance systems and developmental models. They are also increasingly aware of the dynamism of a rising Asia. Singapore began to take a focused interest on the Middle East three years ago. My overall impression is that the Middle East is at a tipping point. The region faces major political and security challenges like the Palestinian-Israeli conflict, situation in Iraq and Iranian nuclear issue. These are deeply complex and inter-connected issues, made even more complicated by a long history of distrust and religious conflict. We in Asia wish the Middle East well. We hope that the Middle Eastern countries can find ways to either resolve the issues or at least manage them in such a way as to avoid the region from tipping over. Despite the challenges, there are many positive developments to balance the negative challenges in the Middle East. Breathtaking physical transformation and impressive development are taking place  BIS Review 21/2007  1  there. High oil prices and sound policies underpin this strong economic performance. Within the region, the Gulf states are taking the lead to modernise and diversify their economies in as quick a time as possible. If these positive forces tip the region in the direction of peace, cooperation and development, the Middle East will, together with Asia, transform the world in this century. Asia's growth story is already well-known. China and India will be the lead players.