andrew sentence: the "new normal" for the global economy
TRANSCRIPT
The “New Normal” for the global economy
Andrew Sentance Senior Economic Adviser, PwC Nuffield Health Summit Thursday 7th March 2013
www.pwc.co.uk
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
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
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
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
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
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
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
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
PwC
Pre-2007 growth drivers have been undermined
Sustained growth
Easy money
Cheap imports
Confidence in policy regime
Slide 10 The new normal
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
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
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
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
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