Dr. Andrew Sentance presented on the "new normal" of economic growth in Western economies after the financial crisis. He outlined that growth rates since the crisis have been much lower than in the decades prior. Productivity growth across Western nations has also slowed significantly. The key drivers of strong pre-crisis growth, like easy monetary policy and confidence in institutions, may not return quickly. The presentation described the current phase of disappointing Western growth and volatility that could persist into the mid-2010s and a potential new growth phase later in the decade based on different drivers.

1. www.pwc.co.uk
Rediscovering growth - after
the crisis
Dr Andrew Sentance
Senior Economic Adviser, PwC
Capital Markets Top Seminar
Aalto University, Helsinki, 25th September 2014

2. Growth trends in the “New Normal”
average % per annum GDP growth in major Western economies
4
3,5
3
2,5
2
1,5
1
0,5
0
Source: OECD *GDP-weighted
PwC
Slide 2
-0,5
1989-99 2000-07 2010-14
The new normal

3. Sluggish productivity across the West
GDP per person employed in major Western economies, 2006=100
120
115
110
105
100
95
Canada Finland France
Germany Italy Netherlands
Spain UK US
Source: IMF World Economic Outlook, April 2014
PwC
90
2006 2007 2008 2009 2010 2011 2012 2013 2014
Slide 3
The new normal

4. Pre-2007 growth drivers have been undermined
PwC
Sustained
growth
Easy money
Cheap
imports
Confidence
in policy
regime
Slide 4
The new normal

5. 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
PwC
Slide 5

6. Two phases of the “new normal”
Current Phase:
 Disappointing western growth to continue into mid-2010s
 Financial volatility persists
 High and fluctuating energy and commodity prices
New Growth Phase?
 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
 Some Western economies better placed than others
Businesses, policy-makers and investors need strategies to
manage and survive through current disappointing growth,
while building potential opportunities for the future.
PwC
Slide 6
The new normal

7. Business success in the “new normal”
Opportunities in Asia and emerging markets
Harnessing technology and innovation
Repositioning for structural and market change
Increasing business flexibility and adaptability
Efficient use of energy/resources
The new normal
PwC
Slide 7

8. 2014 Global Economic Weather Map
Source: PwC main scenario
PwC
Russia
Germany
UK
US
Brazil
Greece
India
1.7
Spain
Key
Canada
Mexico
South Africa
0.5
Japan
Australia
Italy
Ireland
3.0
France
2.2
2.3
2.6
0.9
0.9
1.8
2.0
0.1
0.3
1.8
5.3
2.6
7.4
1.5
x.x = GDP growth in 2014
China
Slide 8

9. Europe’s North-South divide
Unemployment as % of labour force
18
16
14
12
10
8
6
4
2
Source – PwC calculations based on ILO standardised unemployment rates
The new normal
PwC
Slide 9
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
N & E Europe (inc UK) S Europe & France United States

10. Policy agenda for growth
• Regional and global trade liberalisation
• Strengthening the supply-side of the economy
PwC
 Effective competition and business regulation
 Tax reform
 Labour market flexibility and efficiency
 Infrastructure, education/training and research
• Public sector restructuring and reform
• Orderly exit from monetary stimulus
The new normal
Slide 10

11. More on Rediscovering Growth …
Email: andrew.w.sentance@uk.pwc.com
Blogs: http://pwc.blogs.com/economics_in_business/ and
http://andrewsentance.com/the-hawk-talks
Book: “Rediscovering growth: After the crisis”
Twitter: @asentance
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