Club hears about current economic prospects

We were delighted that Angela McGowan, Chief Economist, Danske Bank addressed the Club with an incisive account of the current state of the world's economy and prospects for 2015 which was greatly appreciated by members.

Among many highlights she noted that:

• in the global economy the US is forecast to grow by 3% in 2015, Europe 1.5% and China, now slowing, at 7%
• in the emerging markets oil exporting countries e.g. Russia will suffer whilst the oil importing countries get a boost
• however the IMF has warned that the emerging markets will suffer when the US economy improves shortly as forecast
• the US are the growth drivers, current policy has meant that business and consumer confidence is high, unemployment, inflation and financing costs low
• Europe had a difficult year in 2014 – the Ukraine crisis impacted confidence, difficulties in re-building competitiveness (Italy and France), high unemployment at 11.5%, deflationary threat and its effect on DEBT and the ongoing uncertainty with Greece
• however 2015 could be very different as the ECB expand its Balance Sheet which will have a very positive impact on confidence, the low Euro is great for exporters and rising inflation and there are signs of increased investment with loans to the Private Sector in December showing an increase – the first time since 2012
• further Euro weakness to sterling is forecast
• in the UK a growth of 2.8% is expected, unemployment is down, inflation 3%, house prices are rising and earnings up 1.7%; there is low inflation because low oil prices, international food prices falling, the strength of sterling and supermarket price wars
• interest rates pose a dilemma as there are reasons for both holding and raising the rate; those for holding include inflation down, slack in the economy and uncertainty in Europe and for raising that it would take 18 months to work so should begin now, wages are expected to rise the fall in inflation is tempory and swaps have been at 2% for 5 years with no expectation of a big rise
• risks for the UK economy include the election uncertainty and an indecisive result, the next pace of fiscal consolidation with a very sharp squeeze expected and the "Britexit" of Europe
• in NI job announcements are strong, employment is high and growing with unemployment now 6%, consumer confidence is high with a growth rate of 2.2% forecast
• potential risks are the re-structuring of the Public Sector, a more focussed industrial strategy I needed, the lack of a fiscal strategy, pace of the imposed austerity, where the Public Expenditure reductions will fall and the impact of the strong pound on exports and the agricultural sector
• however it is a good time in NI to borrow for investment, brand NI is improving as is reflected in the increased number of 'big events' coming here.

She concluded that the UK economy is on track though there is a fixation on reducing Public Expenditure with VAT and tax raising avoided and that there will be massive cuts in 2016-2018 because cuts are behind plan as the UK took its foot off the austerity pedal due to the slump in GB and Europe's problems. Rebalancing of the economy is required but there is an additional £350m funding available for infrastructure.