2. World Electronics Forum Setting the Scene – Economic Considerations Mark Beatson Director, Innovation Economics, DTI

3. WORLD ELECTRONICS FORUM SETTING THE SCENE – ECONOMIC CONSIDERATIONS Global growth % growth in real GDP 200420052006 US4.23.6 (OECD)3.3 Japan2.61.8 (OECD)1.5 UK3.21.9 (OECD)2.2 Euro Zone1.81.3 (OECD)1.7 Germany1.11.0 (OECD)1.3 France2.01.6 (OECD)2.0 Italy1.20.21.2 Spain3.1 3.0 China (IMF)9.58.58.0 India (IMF)7.36.76.4 Source: Aug 05 Consensus Economics, OECD & IMF

4. WORLD ELECTRONICS FORUM SETTING THE SCENE – ECONOMIC CONSIDERATIONS Key Drivers of Global Growth Ongoing rapid growth in world trade and investment flows EU-15 reforms successfully; new members continue to catch-up gradually. Japanese deflation comes to an end and growth recovers Emerging markets continue to catch up with the West –Not just India and China, but increasingly Brazil, Russia, South Africa, Malaysia etc.

5. WORLD ELECTRONICS FORUM SETTING THE SCENE – ECONOMIC CONSIDERATIONS Key risks Oil price shock –Extent of resilience still not fully clear US current account deficit leads to a disorderly correction –Risks to areas where exports have been dominant recently (e.g. EU, Japan) –Risks of protectionism

6. WORLD ELECTRONICS FORUM SETTING THE SCENE – ECONOMIC CONSIDERATIONS Longer term challenges Energy and commodity prices Population ageing Extent of opening up of world markets Speed of technology change

7. WORLD ELECTRONICS FORUM SETTING THE SCENE – ECONOMIC CONSIDERATIONS Implications of a challenging environment For business –Creating and sustaining value through innovation –Use of ICT appears to have been major driver of US productivity growth For Governments –Appropriate framework policies and business environment. –Investment. –Targeted policies to address market failures and encourage innovation processes.