Transcript Title SUBTITLE

The winning and losing nations
(or Sunrise, Sunset and Serendipity – time to start
dropping BRICs)
Sixth Gresham Lecture
Douglas McWilliams
Mercers School Memorial Professor of Commerce at Gresham College
Centre for economics and business research ltd
Unit 1, 4 Bath Street, London EC1V 9DX
t: 020 7324 2850 f: 020 7324 2855 e: [email protected] w: www.cebr.com
Objective
To examine which countries are likely to perform
relatively better in the changed world and which ones are
likely to perform relatively worse
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2
Overview
The context – previous lectures in the series
Sunrise and sunset cycles
Time to start dropping BRICs
Sunrise economies
Sunset economies
Serendipity economies
Outlook to 2050
The 2013 Budget
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3
The sunrise cycle
Cheap
educated
labour
Strong
productivity
growth
High
investment
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Export
growth
leading to
rising
GDP
High
profits
4
The sunset cycle
Costs
cannot
compete
Stagnant
productivity
Falling
investment
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Weak
exports
leading to
weak
GDP
Profits
squeeze
and loss
of tax
5
The misery cycle
Competitive
wage below
welfare level
Higher taxes
and reduced
public
services
Financial
collapse
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Collapsing
employment
and GDP
Escalating
deficits
6
Time to start dropping BRICs
Concept has been very helpful in boosting understanding
of globalisation process
But increasingly the BRICs economies are becoming too
diverse for one category
And it mixes those with internal dynamic growth with
those who just got lucky with high energy or mineral
prices
At the moment with energy and minerals prices high, both
groups have had rapid growth in spending power
But in the future, these prices – though on average rising –
will not rise further by as much and energy prices could
even drop beyond 2020
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The world economic league table 2012-2022
Rank, Rank,
2012
2022
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
1
2
3
6
9
8
5
13
7
4
11
14
17
15
12
Country
United States
China
Japan
Germany
France
United Kingdom
Brazil
Italy
Russia
India
Canada
Australia
Spain
Mexico
Korea
2012 $
2022 $ Change 2013 $
GDP
GDP
from
GDP Rank, Rank,
(billions) (billions)
2012 (billions) 2012 2022
15,682
8,230
5,958
3,399
2,605
2,443
2,257
2,012
1,954
1,819
1,818
1,541
1,350
1,178
1,151
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23,496
19,516
7,375
4,275
3,185
4,061
4,389
2,173
4,242
4,935
2,511
2,014
1,385
2,005
2,304
0
0
0
-2
-4
-2
2
-5
2
6
0
-2
-4
-1
3
16,137
8,950
5,947
3,354
2,540
2,578
2,470
1,925
2,094
2,111
1,839
1,581
1,296
1,206
1,234
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
10
16
19
18
25
22
26
21
33
23
27
20
36
30
24
Country
Indonesia
Turkey
Netherlands
Saudi Arabia
Switzerland
Sweden
Norway
Poland
Belgium
Islamic Republic of Iran
Argentina
Taiwan Province of China
Austria
South Africa
Thailand
2012 $
2022 $ Change
GDP
GDP
from
(billions) (billions) 2012
880
783
773
657
632
525
501
490
484
484
475
475
398
384
366
2,568
1,748
948
1,063
683
775
661
826
568
771
643
894
514
629
695
6
1
-1
1
-5
-1
-4
2
-9
2
-1
7
-8
-1
6
8
Sunrise economies
China
India
Indonesia
Korea
Mexico
Turkey
Taiwan
Thailand
Nigeria
Sri Lanka
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Sunset economies
US
Japan
Europe
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Serendipity economies
Russia
Brazil
Canada
Australia
Saudi Arabia
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Ethnic composition of US population forecast for 2050
2005
2050
Foreign born
12
19
White
67
47
Hispanic
14
29
Black
13
13
Asian
5
9
Source: Pew Research Centre
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World outlook for GDP for large economies
Billions of US dollars, current prices at market exchange rates
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The main Budget measures
Some cuts in current spending (may be more than seems
because of need to absorb higher NI charges)
Extra spending on infrastructure
Housing market package
Rise in personal allowance for income tax
Cut in corporation tax
NIC allowance for expanding small businesses
Potential major monetary policy reforms
Revised inflation remit for MPC
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Unrealistic hopes of a quick Eurozone recovery persist
Eurozone real gross domestic product, annual percentage change
4%
3%
2%
1%
0%
-1%
-2%
-3%
-4%
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
-5%
Cebr
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OBR Budget 2013
15
ECONOMIC OUTLOOK
OBR still looks too optimistic on growth in the medium-term
UK real gross domestic product, annual percentage change
5
4
3
2
1
0
-1
-2
-3
-4
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
-5
Cebr
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OBR Budget 2013
16
PUBLIC FINANCES
Borrowing in 2017/18 to be £30 billion higher than forecast by the OBR…
Public sector net borrowing, £ billion, financial year
140
120
100
80
60
40
20
Cebr forecast
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2017/18
2016/17
2015/16
2014/15
2013/14
2012/13
2011/12
0
OBR March 2013
17
PUBLIC FINANCES
… with the debt:GDP ratio rising above 90%
Net debt as a percentage of GDP, fiscal years
95
90
85
80
75
OBR March 2013
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2017/18
2016/17
2015/16
2014/15
2013/14
2012/13
2011/12
70
Cebr
18
ECONOMIC OUTLOOK
£10,000 personal allowance to boost real disposable income growth
Income tax (£) paid by someone with a gross yearly income of £25,000
3,500
3,400
3,300
3,200
3,100
3,000
2,900
2,800
2012/13
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2013/14
2014/15
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PUBLIC FINANCES
Corporation tax rate reduced even further
UK corporation tax - main rate
32%
30%
28%
26%
24%
22%
20%
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2013
2014
2015
2010
2011
2012
2007
2008
2009
2004
2005
2006
2001
2002
2003
18%
20
PUBLIC FINANCES
Small businesses to benefit from employment allowance
Number of enterprises by employment size, 2011, thousands
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
9
0
Zero or 1
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21
10-250
250+
21
PUBLIC FINANCES
Help to buy scheme launched to support new and existing home purchases
Approvals of loans for home purchases, thousands
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MONETARY POLICY
New MPC remit could pave the way for medium-term interest rate commitments
Bank of England Bank Rate, percentage
6
5
4
3
2
1
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Dec-18
Dec-17
Dec-16
Dec-15
Dec-14
Dec-13
Dec-12
Dec-10
Dec-11
Dec-09
Dec-08
Dec-07
Dec-06
Dec-05
Dec-04
Dec-03
0
23
MONETARY POLICY
Long term borrowing rates to rise but remain extremely low
Yield on 10 year government bonds, percentage
6
5
4
3
2
1
Q4 2018
Q4 2017
Q4 2016
Q4 2014
Q4 2013
Q4 2012
Q4 2011
Q4 2010
Q4 2009
Q4 2008
Q4 2007
Q4 2006
Q4 2005
Q4 2004
Q4 2003
© Centre for economics and business research ltd, 2013
Q4 2015
Forecast
0
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The winning and losing nations
(or Sunrise, Sunset and Serendipity – time to
start dropping BRICs)
Douglas McWilliams,
Mercers’ School Memorial Professor of Commerce at Gresham College and Chief
Executive of Cebr