The UK economy in a global context Philip Shaw Chief Economist, Investec WMEF ‘Entrepreneurship, Innovation & Growth’ Conference 21 June 2013

Global economic trends…

Global growth: Actual & projections…… Source: IMF World Economic Outlook April 2013 Forecasts Annual GDP Growth

Shares of global growth have shifted Source: IMF World Economic Outlook April 2013 Contributions to global growth (percentage points)

Key economies - GDP growth recent and forecast… Source: IMF World Economic Outlook April 2013 Annual GDP growth

A few points on global growth 20y ago the US and EU accounted for half of world GDP growth – now it is less than 20% China and India’s share in %! Rising trend should remain in place in Emerging Markets generally Chinese growth has cooled – could be less than 8% this year (!) – down from peak of 14% in 2007 Global GDP growth of 4%-5% is not the norm – long-term average is 3%-3.5% This is a super cycle – it is not the world ‘New Normal’

The UK economy in a global context…

Sterling depreciation Source: Bank of England - 24 % Trade weighted sterling

Euro crisis hits EU17 growth outturns… Annual GDP growth Source: Datastream, Investec forecasts

UK trade export volumes weakened by Euro area crisis.. Source: ONS Export volumes (% change 3m yoy), trade balance (£bn)

Global GDP growth – weighted by UK trade shares Source: IMF World Economic Outlook April 2013, Bank of England, Investec calculations Annual GDP growth Forecasts

UK export growth to selected countries Source: ONS Change between 2009 and 2012 (£ values)

Other factors

Quarterly UK growth- contributions by sector Source: Unwinding of Jubilee effect and Olympic boost Diamond Jubilee Royal Wedding Collapse of Lehman Brothers

Various factors to watch for…. New Bank of England Governor on 1 July.  More stimulus? QE? Interest rate guidance? An upturn in the housing market?  Bank of England Funding for Lending Scheme helped mortgage market.  Chancellor’s Help to Buy scheme to raise demand?  Government help to SME sector? New Bank of England Governor on 1 July.  More stimulus? QE? Interest rate guidance? An upturn in the housing market?  Bank of England Funding for Lending Scheme helped mortgage market.  Chancellor’s Help to Buy scheme to raise demand?  Government help to SME sector? New Euro area upturn?? Is the eurozone financially more robust? Are individual countries less systemic? (Probably!) Attitudes to and UK relationship with the rest of ‘Europe’.  Referendum on the EU in the next parliament?? New Euro area upturn?? Is the eurozone financially more robust? Are individual countries less systemic? (Probably!) Attitudes to and UK relationship with the rest of ‘Europe’.  Referendum on the EU in the next parliament??

EU referendum opinion polls Source: YouGov Voting to stay in the EU (net balances)

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