There is some optimism about the economy for the next few years, David Smith, economics editor of the Sunday Times told delegates at the BMF Members Day.
However, he said that there is no point in hiding the fact that it has been very bad indeed. “There has been a loss of momentum. It would be wrong to deny that,” he said.
“There is a global recovery. The news headlines might indicate that we are still in the doldrums, but, although world trade fell, there has been a strong recovery. In 2010 global growth was good, in 2011 it wasn’t bad. This year, growth was rather slower but we are not stuck in a 1930s-style slump. It’s important to remember that.”
Smith looked at the fact that the stock markets are still – justifiably – edgy , partly because of that slow-up of the global economy as well as the hope that the US will avoid the ‘fiscal cliff’ of tax rises and spending cuts of around 5% GDP which would push it back into recession
Smith added that there is no doubt that the Euro system is under deep strain, although for 10 years it has been working. “For the last couple of years the Euro Zone has not worked the way it should have done. But no-one has actually left (the Euro) so far.
“The worst thing would be a disorderly breakup of the Euro Zone, but there does seem to be the political will to hold it together. At moment, all efforts are being directed towards keeping an extended muddling through and greater integration throughout Europe.”
He also pointed out that between the years 1992 to 2008 there were 66 consecutive quarters of economic growth in the UK. “I hope you treasure the memories of that, because we won’t see it again,” he said. “Contrast with the time since then when we had 12 quarters and four of them were negative. It’s obviously lot tougher and growth is harder to come by than it was.”
Smith also says that, while it may not feel like it but the underlying picture for the UK is stronger than we get from official GDP figures.