This article appears in Friday's Financial Times' survey - 2002 and Beyond - the survey exploring the World Economic Forum agenda.

Although the outlook for the world economy may be troubling and uncertain, it still seems better than most people dared to hope in the dark days of last September.

The war in Afghanistan has been prosecuted with impressive, if not total, success, and there are already signs that business and consumer confidence is returning, both in the US and in Europe.

Financial analysts and economic forecasters have begun to revise up their expectations of corporate earnings and growth this year, and it seems very likely that US output will grow in the current quarter. The ground seems prepared for a strong and stable recovery.

However, there is a danger that the wave of relief that has lifted the world's spirits will obscure the other problems of the US and global economy, which pre-dated September 11 and are still with us. Sentiment is improving as the threat of prolonged global instability recedes, but the hangover from the boom of the 1990s may not be cleared so quickly.

The September 11 attacks were a significant economic shock, but they were not the only cause, or even the principal cause, of the global downturn. The International Monetary Fund's estimate of the direct economic effects of September 11 is relatively small, just a few tenths of a percentage point off US gross domestic product, although the effect of the falls in confidence could be greater.

In its December update of its World Economic Outlook, the IMF noted that the Kobe earthquake in 1995, which caused greater damage to property than the September 11 attacks, "had little impact on the path of the Japanese economy either in the short or the longer term".

The Washington-based National Bureau of Economic Research, which fixes dates to US recessions, says this one began as far back as March. Despite some signs of a nascent recovery over the summer, the forces that tipped the US into a downturn - the bursting of the technology bubble in the stock market, the slowdown in consumer spending, the slump in business investment - were all well entrenched before September 11. And the links between the US and the rest of the world, through exports of manufactured goods, through financial markets and through business confidence, had already affected economies in Europe and Asia.

The case for expecting a healthy recovery this year is based on more than just the lifting of America's spirits. There is also a powerful stimulus coming from the decisive loosening of monetary policy last year, especially in the US, and from the fall in the price of oil.

These will undoubtedly both help to support the world economy. But confidence in their effectiveness has to be tempered by concern that the economic cycle has taken the world into uncharted territory; at least in the memories of most policymakers now in office.

Since the Second World War, most recessions have come about as the result of deliberate policy actions: typically a rise in interest rates intended to curb rising inflation. This time, however, inflation has been quiescent throughout the cycle.

Instead, boom and bust have been driven by rising asset prices, especially equities, a massive credit expansion, and an investment boom that affected countries to varying degrees across Europe and Asia, but was above all centred on the US.

Expectations of future earnings growth soared in the second half of the 1990s, fuelling both consumption and investment. When investors and businesses decided that those expectations were unrealistic, the bubble burst: stock markets fell, consumer spending slowed and business investment was cut. In the short term, US output is likely to rise simply because of the turning of the stock cycle. Inventories have been cut so fast that even a small rise would have a significant effect on output growth.

But this could be what Stephen Roach of Morgan Stanley describes as the "head feint" for the second leg of the double-dip recession. Unless demand picks up, output could easily slip back again later in the year.

For US businesses, the legacy of the 1990s is an overhang of unprofitable investment, overcapacity, low cash flow, weak profits and high debts. Non-financial corporations' debts are a higher proportion of cash flow than at any time in the past 45 years. The result is that companies are likely to be cautious about investing. Intel, traditionally a good marker for the technology industry as a whole, has said this year's capital expenditure will be 25 per cent lower than last year's.

For consumers, the 1990s boom has left a savings ratio of about 2 per cent, compared with 9 per cent at the beginning of the 1990s. Even if consumers do not decide they need to save much more, they are not likely to save very much less.

None of this means that there will be no recovery, but it does suggest the recovery could be sluggish and uneven.

However, there are worse outcomes possible. Through all the upheavals of the past year, US stock markets and the dollar have remained remarkably stable. But equities are, by most historical standards, still grossly overvalued and the dollar is menaced by the still massive US current account deficit.

The perpetual insistence from the US Federal Reserve that the rise in productivity growth is still in place is an incantation designed to make sure that those markets stay stable. If investors' faith in the US economy is broken, the resulting turbulence will make the past year seem tranquil.

Ed Crooks answers your questions on global economic issues during the World Economic Forum - follow this link.