William C Dudley: Panel remarks at Bank Indonesia-Federal Reserve Bank of New York Joint International Seminar Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Bank Indonesia-Federal Reserve Bank of New York Joint International Seminar, Bali, 31 July 2016. *  *  *  Linda Goldberg, Jonathan McCarthy and Joseph Tracy assisted in preparing these remarks. In my remarks today, I will focus on why global growth has been so anemic following the financial crisis and what we can do about it. I think it is fair to say that the global recovery following the financial crisis has been disappointing. Growth is below pre-crisis levels for the United States, Europe, Japan and China. For example, in the U.S., real GDP growth has averaged only about 2.2 percent per year over the period from 2010 to 2015, below the pre-crisis average of 2.4 percent from 2003 to 2008. This slower growth performance has been accompanied by relatively low inflation rates – persistently below the objectives of the monetary policy authorities in the United States, Europe and Japan. As I see it, there are many causes for these persistent shortfalls in growth, and they vary across regions and countries. Let me focus on the reasons for the United States in the post crisis period. Growth has been weaker than expected for many reasons.
The third point is the risk to growth. For the most part, we still see developments in the global economy as a key downside risk to Thailand’s growth this year. A key risk at this time is the strength of global recovery in the second-half of the year, given a more limited room in the advanced economies for using fiscal stimulus to drive growth because of concern over longer-term fiscal sustainability and the risk of eroding inflation expectations. Another issue is the possible spillover of concerns over sovereign debt onto the European banking sector. Domestically, the drought situation seems to have improved substantially after a bout of plentiful rainfall country-wide. Finally, we have risks relating to how Thailand’s political situation will evolve going forward. This is an issue which remains a known-unknown to most Thais. For this evening, I have been asked to dwell a bit more into the interactions between politics and the economy in the context of what has been happening in Thailand. Without getting too much off track, let me end my remark with three personal observations on this point. First, it is clear that politics does affect the economy and its performance. The channels of impact come largely through: (1) disruption to normal businesses from unsettling political events as we have seen in the last two years; (2) its effects on the country’s image internationally which negatively effects our international sectors such as tourism and exports; and (3) its impact on investor confidence due to the perception of political instability.