Procurement Forum, 17th March 2010

Managing the future: limbering up for economic growth in 2010

with David Smith, Economics Editor of The Sunday Times.

The recession is over, and the global economy is growing again. However, the UK needs to engage more with emerging markets – such as China and India – to help speed up its own recovery efforts. These were the key messages from an engaging speech by David Smith, Economics Editor of The Sunday Times, at a recent Fujitsu Procurement Forum event. “It’s a wake up call that we have to do more with places which are growing more rapidly, and they don’t tend to be close to home.” he said. “They’re not the UK or European markets. The opportunities are somewhat further afield, and we’ve got to make sure we’re locked into these opportunities.”

Smith stressed that the recent financial crisis had not been a ‘normal’ recession in many ways. Firstly, the way it started – with the collapse of Lehman Brothers Inc, and the near instant effect this had on the world economy. “Companies stopped taking on new staff, they stopped marketing, they stopped buying. Everything stopped,” he explained. “World trade fell by 20% in the space of six months. And that’s never happened before. That didn’t even happen in The Great Depression.”

Smith stressed that things have now turned around, but that recovery from the recession would not be ‘normal’ either. The IMF has just revised up its world growth forecast for this year, from 3.1% to 3.9%. And with a ‘normal’ growth rate at around 4%, this strongly indicates we’re on trend to return to more expected levels of growth during 2010.

However, there is a marked contrast in the performance between ‘advanced’ economies (such as the US and the UK) and ‘emerging’ economies (such as China and India). On average, advanced economies fell by around 4% last year, whereas India grew by 6% and China by 8%. “Every advanced economy is somewhat constrained by problems that are still there in the banking system,” Smith said, “plus the need to repair public finances - much more so than in emerging economies.”

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