For example, the process of private sector balance sheet repair is nearing an end and the global stance of fiscal policy is shifting from contractionary to expansionary. Any rise in potential productivity growth would also boost the equilibrium rate. The scope for the equilibrium rate to rise will also be greater if spare capacity is larger than currently estimated. 11 See Carney, M (2018), ‘Guidance, Contingencies and Brexit’. 12 For example, as explained by Richard Clarida in his speech ‘Data Dependence and US Monetary Policy’, 27 November 2018. 7  All speeches are available online at www.bankofengland.co.uk/speeches  7  In the MPC’s projections published last week, the balance of headwinds to growth and more accommodative policies are expected to return global growth to around potential rates by the end of the year (Table 1). Table 1: MPC projects global growth likely to settle around potential rates Projections Average 1998-2007  2018  2019  2020  2021  Memo: potential  PPP-weighted  4  3½  3¼  3¼  3½  3½  UK-weighted  3  2½  2  2  2  2¼  Sources: Bank of England, Eurostat, IMF World Economic Outlook (WEO), ONS, US Bureau of Economic Analysis and Bank calculations. Notes: 2018-21 figures show annual average growth rates. Potential growth is calculated as an average from 2019-2021. This is the most likely scenario unless there are shocks from the other two cycles.
Against the backdrop of fear and uncertainty, banks have tightened their lending and consumers have become more cautious in their spending. This will act as a drag on the euroarea economy going forward. A key constraint for both the US and euro-area, as well as many other advanced economies, is the limited policy space available to authorities. In these countries, monetary policy and fiscal stimulus have been pushed to their limits. Limited capacity to respond to new shocks thus represents a real risk for these economies, and for the global economy, that we must be weary of. In this setting, and given the deep-seated nature of the problems being faced, meaningful remedies rest just as much on political factors as on economic ones. How governments respond and how their electorates receive these responses will be an important source of uncertainty. In contrast, the rising economies in Asia offer a more positive outlook. Despite the slowdown in exports of many Asian countries, reflecting the softer global economic backdrop, domestic demand remains robust. More fundamentally, the continued rise of China and the formation of the ASEAN Economic Community (AEC) will generate enormous economic opportunities for the region. As will be discussed later, the key challenge for Thailand will be how to optimally position ourselves to reap the full benefits of this trend. This brings me to the internal challenges.