andrew sentence: the "new normal" for the global economy
TRANSCRIPT
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The “New Normal” for the global economy
Andrew Sentance Senior Economic Adviser, PwC Nuffield Health Summit Thursday 7th March 2013
www.pwc.co.uk
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PwC
The world economy continues to expand World GDP, US $ trillion
32
61 71
93
0 10 20 30 40 50 60 70 80 90
100
2000 2008 2012 2017
The new normal Slide 2
Source: IMF World Economic Outlook, October 2012
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PwC
... but the global recovery is uneven % per annum change in GDP
* based on 6 largest economies
Source: IMF World Economic Outlook, October 2012
-6
-4
-2
0
2
4
6
8
10
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Asia-Pac* EU US
Slide 3 The new normal
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PwC
This recovery is different to 80s and 90s average % per annum change in GDP over first three years of recovery
Source: ONS, PwC and IMF. 2012 based on latest IMF and PwC forecasts
Slide 4
0
1
2
3
4
5
6
7
UK (exc oil&gas) Advanced economies Emerging and developing economies
1982-84 1992-94 2010-12
The new normal
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PwC
... with Asia-Pacific now the dominant region Percentage share of world GDP, current market prices & exchange rates
0%
5%
10%
15%
20%
25%
30%
35%
40%
1980 1990 2000 2010
US EU-27 Asia-Pacific G10*
The new normal Slide 5
* Includes Australia, China, India, Indonesia, Japan, Malaysia, Singapore, South Korea, Taiwan Province of China and Thailand. Source: IMF World Economic Outlook
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PwC
UK economic growth has disappointed % per annum change in output, excluding North Sea oil and gas
* Weighted average of manufacturing and services growth
Note: Average non-oil GDP growth since mid-2009 = 1.3% Source - ONS The new normal
Slide 6
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Non-oil GDP Underlying* Ave GDP growth since 1970
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PwC
... while inflation has been high and volatile % per annum increase in UK consumer prices index
Source: Office for National Statistics
Slide 7
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
Inflation Target Ave 2008-12
The new normal
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PwC
What is the “new normal”?
• 2007/8 marked the end of a long and sustained expansion in UK and other Western economies
• Conditions which supported this period of growth are not set to return quickly
• Prolonged structural readjustment underway in response to financial crisis and East-West rebalancing
• Significant parallels with disappointing growth and volatility of the 1970s and early 1980s
The new normal Slide 8
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PwC
A long expansion has come to an end average % per annum change in UK GDP and consumer spending
* Based on PwC forecasts for 2012/3 and Treasury Independent Consensus, 2014-16
Source: ONS, PwC and HM Treasury
The new normal Slide 9
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
1948-73 1973-82 1982-2007 2007-16*
GDP Consumer spending
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PwC
Pre-2007 growth drivers have been undermined
Sustained growth
Easy money
Cheap imports
Confidence in policy regime
Slide 10 The new normal
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PwC
Two phases of the “new normal” • Phase 1:
Disappointing western growth to continue through mid-2010s
Financial volatility persists
High and fluctuating energy and commodity prices
• Phase 2:
Clearer and more sustained growth dynamic emerges
Perhaps starting in the second half of this decade
Different set of growth drivers from pre-2007 long expansion
Businesses, policy-makers and investors need strategies to manage and survive through Phase 1, while building potential opportunities for Phase 2.
Slide 11 The new normal
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PwC
Uneven growth outlook across global economy % per annum change in 2013 GDP
12
Source: PwC main scenario for 2013
Russia
Germany
UK
US
Brazil
India
Spain
Canada
Mexico
South Africa Australia
Japan
Italy
Greece
Ireland
France
1.9
2.0
3.6
3.0
-1.1
0.2
0.8
1.1 0.4
-1.2
2.9
6.0
-4.2
2.5
8.0
1.0
3.8
China
The new normal
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PwC
Northern Europe is the engine of EU economy % per annum change in GDP
Source: Eurostat and European Commission forecasts
-5 -4 -3 -2 -1 0 1 2 3 4 5
2001 2003 2005 2007 2009 2011 2013
Germany & N Europe France & S Europe UK & Ireland
Slide 13 The new normal
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PwC
UK – subdued consumers holding back growth % per annum change in UK GDP and consumer spending
Slide 14
-5
-4
-3
-2
-1
0
1
2
3
4
5
97-07 ave 2008 2009 2010 2011 2012 2013 2014-16
GDP Consumer spending
Source: ONS, Nov 2012 PwC economic forecast and Treasury Independent Review of Forecasts The new normal
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PwC
Success drivers in the “new normal”
Repositioning towards Asia/emerging markets Innovation and exploitation of new technology
Understanding market/structural change
Providing strong value proposition to customers
Flexible and adaptable business model
Efficient use of energy/resources
The new normal Slide 15