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I think the more extreme versions of the "secular stagnation" seem do not apply to the UK. We still have some economic growth. It is a little below historical trends, just about 2%, but versus other developed economies, particularly some of those in the EU and Eurozone as well, the UK looks relatively solid. There are productivity challenges and structural issues with the UK economy. I would say the recovery that we are seeing looks less well balanced now than it did in its earlier phases. The recovery looks more reliant on consumer demand, on parts of the service sector and the property market rather than areas like manufacturing and export sector and other business services. There are definitely issues, and I believe 2016 will be more challenging year than 2015. However, to go with more pessimistic "secular stagnation" conclusion, I believe would be a little bit premature.
There have been some signs that Britain's economy slowed in early 2016. Nevertheless spending by consumers is holding up for now, and some economists said private consumption growth would dip only slightly in early 2016 but uncertainty emanating from the outcome of the upcoming EU referendum is likely to dampen currently buoyant levels of consumer confidence and delay household spending decisions. What is your outlook on this matter, and do you agree with this?
I think the referendum risk is probably one that will affect the corporate sector first and the consumer sector certainly this year to the extent that employment growth slowed of course, and there would be implications for households and consumer demand. However, in the first instance I believe this is a corporate sector risk, and on the positive side there is the household sector and low inflation, while weak commodity prices are to some extent reinforcing purchasing power. Thus, the real terms measures of consumption I suppose should remain fairly resilient this year, simply because that inflation will probably show a modest rise. Nevertheless, there will also be a resumption of fiscal tightening, which I think will boost consumption.
The further factors to mention is that household in the UK have been running down a savings quite aggressively over the past years. The savings ratio is now at historic lows, just below 4%. The scope for that to fall further to support consumption I think is more limited. I believe we will see a slide slowdown in consumption growth in 2016, but it will continue to be one of the main drivers of the UK economy this year.