Charles Bean: The UK economic outlook Speech by Mr Charles Bean, Deputy Governor for Monetary Policy of the Bank of England, at the Society of Business Economists Annual Conference 2013, London, 22 October 2013. *  *  *  Good morning! It is now more than five years since Lehman Brothers collapsed, ushering in the worst phase of the financial crisis, followed by a sharp and synchronised contraction in global economic activity. While growth was reasonable for the first year after output troughed in the middle of 2009, the pace of expansion since then has proved disappointingly weak. Just how disappointing is illustrated by Chart 1, which shows our August 2010 Inflation Report projection for GDP growth, together with the ONS’s present estimates of what actually happened. It is not a pretty sight. Whereas our central expectation was for a cumulative rise in output of 9% over the following three years, the actual rise is presently estimated to have been a miserable 2%. And we weren’t alone. The performance of other forecasting outfits was pretty similar. At a global level, a similar story can be told. The IMF has consistently revised down its projections for global growth. Back in October 2010, it was forecasting a cumulative expansion in output of 14% over the following three years, whereas the actual figure was just 10%. Indeed, the Fund has revised down its world growth forecast for 2013 in every subsequent World Economic Outlook: it now expects just 2.9%, against the 4.6% it projected three years ago.
That said, neither the MPC nor the FPC can afford to be complacent. The past five years or so have presented the policy makers here and elsewhere with many difficult challenges. We have discovered that we knew even less about the workings of the economy than we thought we did. And we have moved into policy territory that we could scarcely have imagined during the halcyon days of the Great Moderation. Happily, there are signs that a recovery is at last starting to gain traction here in the United Kingdom. But there is still a long way to go before we can say the economy is mended. Until that is the case, monetary policy will need to remain supportive and the guidance we issued in August was intended to make that clear. Thank you! The UK economic outlook Society of Business Economists Annual Conference Charlie Bean, Deputy Governor for Monetary Policy 22 October 2013  2  6  This point was originally made in a Credit Suisse note entitled “Market to Mark”, 4 September 2013.