Market Turbulence and Growth Prospects

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Question 1: Do you agree that economic growth prospects for the global economy have seriously deteriorated?

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Question 2: Do you agree that the falls in share prices, low oil prices and the slowdown in some emerging market economies will have a significant negative impact on the UK’s economic recovery?

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The January 2016 Centre for Macroeconomics survey of experts asked for the panel’s views on the significance of the recent falls in share prices, low oil prices and the slowdown in some emerging market economies. While all recognise the considerable uncertainty in the world economy, more than two thirds do not fear that these events will have a significant negative impact on the UK’s economic recovery. The main argument is that any negative effect due to lower foreign demand and market instability is compensated by the benefits of lower oil prices.

Background

The beginning of 2016 has been hectic in several dimensions. Oil prices have fallen to levels below $28 per barrel – a 12-year low and only a fraction of the levels we have seen in the decade when prices were above the $100 mark for sustained periods. Moreover, the International Energy Agency warns that the oil market ‘could drown in oversupply’ and further price drops may be possible.

Early 2016 has also seen the announcement that China’s GDP grew by ‘only’ 6.9% in 2015, its lowest growth rate in 25 years. Stock price falls followed. The Shanghai SE Composite Index dropped by 18% in the first two weeks of the year.[i] Stock market indices in several key markets also displayed substantial losses, although not nearly as big as the loss in the Chinese stock market. For example, the S&P 500 dropped by 6% over the same two-week period.

Nobel laureate Paul Samuelson famously said that ‘The stock market has forecast nine of the last five recessions’ – and it may very well be the case that recent turbulence in stock markets has little to do with serious problems in economic growth prospects. Alternatively, it may be that there are real reasons for concern.

Serious weakening of fundamentals?

The first question of this survey asked respondents whether they think that economic fundamentals have worsened. In terms of the relevant period, we are thinking of the last six to 12 months.

Question 1: Do you agree that economic growth prospects for the global economy have seriously deteriorated?

Thirty of our experts responded to this question, of which a strong majority of two thirds either disagree or strongly disagree. Weighting the responses with confidence levels reduces this fraction to 58%.

Among those that disagree, several point to the positive effects of lower oil prices on economic growth. In addition, several simply do not see any changes in fundamentals. For example, Nicholas Oulton (LSE) points out that ‘the recent fall in the Chinese stock market looks more like a correction of a bubble than a reappraisal of fundamentals.’

Two sets of arguments are used to justify agreement. The first is that there currently is a lot of uncertainty. Martin Ellison (Oxford) points out that ‘the VIX has been climbing steadily since the start of the year.’ Morten Ravn (UCL) argues that ‘central bank policies that were rolled out in the aftermath of the financial crisis may paradoxically also have left the economy vulnerable to another bout of financial instability.’

There are several reasons why these results do not indicate that the experts are quite positive about the future outlook. First, several respondents who disagree with the question do think that there has been some deterioration of economic growth, but that this does not qualify as a serious deterioration. For example, Sushil Wadhwani (Wadhwani Asset Management) argues that ‘On the evidence so far, the deterioration in global growth prospects is relatively modest.’

Moreover, several respondents who disagree do think that there is a substantial amount of downside risk and that the recent turbulence could seriously worsen this problem. Michael McMahon (Warwick) points out that ‘the most recent developments may reduce growth prospects somewhat. But the primary impact is to add to the downside risks to financial stability through direct credit exposures, second-round effects through macro-financial linkages, liquidity impacts, and currency-related risk.’

This view is echoed by Andrew Mountford (Royal Holloway), who writes that ‘the implications for the world economy in general of the Chinese slowdown and stock market volatility depend on the vulnerability of the Chinese and Western banking systems to these events. The UK, EU and US regulators assure us that their banks have the capital to withstand such shocks. I hope they’re right.’ Francesco Caselli (LSE), who also disagrees with the question, points out that ‘the psychological effects from the stock-market turbulence could have some significant effect on growth.’

Importance for the UK economy

The second question focused on the consequences for the UK economy of the factors discussed above and asks whether the consequences could be severe enough to risk the recovery. There could be negative consequences because of reduced exports, a strengthening of the pound, increased uncertainty or exposure of UK banks to emerging markets economies.[ii] These negative effects could be countered by the benefits of lower energy prices or other forces that keep the UK economy going.

Question 2: Do you agree that the falls in share prices, low oil prices and the slowdown in some emerging market economies will have a significant negative impact on the UK’s economic recovery?

Thirty panel members responded to this question. Excluding the respondents that neither agree nor disagree, a majority of 70% disagree with the question.

A relatively large fraction of 23% neither agree nor disagree, making clear that there is still substantial uncertainty. Tony Yates (Birmingham) writes ‘right now we don’t know whether this [the fall in stock prices] is just noise, or a response to a slight reduction in growth prospects for China, or the harbinger of something much more serious.’

The main argument given by those who disagree is that any negative effect due to lower foreign demand and market instability is compensated by the benefits of lower oil prices. For example, Ray Barrell (Brunel) points out that ‘lower oil prices have a clear and immediate positive impact on demand in the UK. Equity markets declines have a limited short-term impact on demand as consumers take time to react to them, and firms do little investment through stock market issues.’

The panel members who agree point to the negative effects of uncertainty. Joseph Pearlman (City) writes ‘the drop in oil prices presages high volatility in the cost of energy over the short to medium term, and such an environment of uncertainty will inevitably lead to lower investment.’ Another argument given by several respondents is characterised by Silvana Tenreyro (LSE) as follows: ‘the slowdown in emerging market economies will affect, directly or indirectly, the global demand for UK goods and services and weaken the UK recovery.’

Several of our members point out that we must be careful in distinguishing causes and responses. Jagjit Chadha (Kent) argues that ‘the falls in share prices may be temporary and a response to the understanding that monetary policy will eventually normalise, which itself tells us that the economy is in recovery.’

 

 

[i] From a level of 3539.18 on 31 December 2015 to a low of 2900.97 on 15 January 2016.

[ii] The December 2015 Financial Stability Report of the Bank of England points out that UK banks have significant exposure to China, Hong Kong and other emerging market economies, although the UK banking system should be able to withstand a severe reduction in growth in these countries.

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How the experts responded

Global Economic Growth Prospects

Participant Answer Confidence level Comment
Ricardo Reis London School of Economics and Columbia University Agree Not confident
All pieces of data, from multiple financial markets, to surveys of households and firms, seem to show a lowering of growth forecasts for the world for 2016 relative to a few months ago. Moreover, we can already identify some shocks that should have an adverse effect. At the same time, any attempts to forecast growth, especially at the global scale, are done with not much confidence given the state of our knowledge. And, most forecasts are still for a recovery in the Us economy and, at a slower rate for the EU economies, relative to the recent past.
Wouter Den Haan London School of Economics Disagree Confident
The downside risk has increased, for example, because of the refugee crisis, Brexit, the US presidential elections, and lower than expected growth. But the stock market response may be a bit of an overreaction.
Fabien Postel-Vinay University College London Disagree Confident
Nicholas Oulton London School of Economics Disagree Confident
Prospects have deteriorated seriously for oil-producing states but not for for the global economy . The fall in the oil price is largely due to a rise in supply relative to demand. So for oil-importing states it is a benefit. The recent fall in the Chinese stock market looks more like a correction of a bubble than a reappraisal of fundamentals. It is not very relevant for the rest of the world. The extent of the slowdown in Chinese growth (pretty small on official figures) is what really matters but it is unlikely that the fall in the Chinese stock market is an accurate measure of this.
Alan Sutherland University of St. Andrews Disagree Not confident
David Cobham Heriot Watt University Strongly Agree Very confident
They have certainly deteriorated, and much of that represents the failure of economic policies in different countries since 2008. But the extent of the deterioration is not clear: the world is not going to end just yet.
Martin Ellison University of Oxford Agree Confident
The ultra-low oil price reflects weakening demand and concerns about instability in oil supply as Saudi Arabia and other countries vie for influence in global energy markets. None of this is good news for growth in the global economy. Prospects are further weakened by turbulence in stock markets and a rise in uncertainty (the VIX has been climbing steadily since the start of the year).
Ray Barrell Brunel University London Strongly Disagree Very confident
Prospects for global growth have not deteriorated noticeably in the last six months. The slowdown in growth in China is likely to have a limited impact on demand in OECD countries. Low oil prices stimulate spending on other goods and boost demand in oil consuming countries. The prospect for sustained low oil prices appears to have led to a reduction in equity holdings by some oil related sovereign wealth funds. The sovereign wealth fund selloff appears to have been a factor behind stock market turbulence. Equity market declines only have a significant impact on demand when they spill over in to the solvency of financial institutions. This does not appear to be a significant problem in OECD countries. The Chinese banking system may face problems after the bursting of the stock market bubble, but this is unlikely to cause major problems for OECD economies. The OECD economies are more insulated from Chinese financial markets than they are from Chinese trade. Even if growth slows there remains significant space for a temporary fiscal expansion in in most OECD countries.
Patrick Minford Cardiff Business School Disagree Confident
Very low commodity prices are a usual feature of the post-recession world economy. The last major example was in the 1980s and 1990s, when for example oil dropped below current real levels for more than a decade. This results from large overcapacity in materials production after rapid growth gives way to slump and initially slow recovery. Investment in material capacity is being sharply cut back. But investment in final production is growing and will get stronger. There is probably also a boost to world consumption since primary producing countries seem to cut back consumption less than consuming countries raise it. China is one element in this excess capacity and is eg pushing excess steel supplies onto world markets ad cutting back steel capacity. However it is aiming to boost consumption spending and this is already occurring with fast growth in retail sales and services consumption. World growth is running around the 3% mark, which is lower than the 5% or so in the mid 2000s but that growth then was unsustainable and seems to have been fed by rapid credit growth. Growth at current rates will not ignite another such boom unless monetary policy becomes highly stimulative. Currently monetary stimulus from QE and 'zero' interest rates is having its effect offset to a large extent by the post-crisis surge in bank regulation which has caused banks to shrink their balance sheets, particularly for 'riskier' loans to smaller businesses. Hence monetary stimulus is still fairly weak overall. It is likely that bank regulation will be eased and monetary stimulus increased- eg by the ECB; but the Bank of England is reluctant to tighten while the Fed has said rates will be raised very slowly. With final consumers and investors spending more anyway, growth is likely to strengthen.
Ethan Ilzetzki London School of Economics Disagree Not confident
I disagree only because of the word "seriously" in the question. Even before the beginning of 2016 there were worrying signs from China, which I expected to be a drag on growth in 2016. Oil was already cheap in 2015 and the supply side factors for this price weakness are a positive rather than a negative. If the wealth losses implied by recent stock market declines turn out to be persistent, this will certainly have negative impact on growth this year, but it is very difficult to ascertain the magnitude at this point.
Michael McMahon University of Oxford Disagree Confident
Even before the market volatility of January, it was clear that (i) the global economic recovery is fragile and remains uncertain, and (ii) China is clearly going through a difficult period of economic transition. I believe that the most recent developments confirm this but do not necessarily suggest a “serious” further deterioration. The developments seem to all be interrelated. The slowdown in China and the transition to more balanced growth affects demand for commodities in particular because it means less investment and less manufacturing growth. The largest stocks on the SSE are mostly financial or manufacturing (incl petrochemical) companies. The transition and uncertainty therefore likely has a disproportionate effect on Chinese listed securities. Given its importance in the global economy, this creates uncertainty further a field and hence volatility in those markets. The most recent developments may reduce growth prospects somewhat. But the primary impact is to add to the downside risks to financial stability through direct credit exposures, second-round effects through macro-financial linkages, liquidity impacts, and currency-related risks. However, I believe these primarily remain risks rather part of the central case for now.
Paul De Grauwe London School of Economics Disagree Confident
Kate Barker British Coal Staff Superannuation Scheme Disagree Confident
My view is that equity markets in particular were over-valued. I see this, so far, as a correction to a better appreciation of the prospects for growth.
Sushil Wadhwani Wadhwani Asset Management Disagree Not confident
On the evidence so far, the deterioration in global growth prospects is relatively modest,which is why i disgareed with the statement in the question. However, there are significant downside risks. If equity markets were to fall more,we might see a self-feeding downward spiral. Moreover, the opacity of Chinese economic prospects is worrisome and there are undeniable downside risks associated with a process of hard-to-control capital outflows.
Akos Valentinyi University of Manchester Disagree Confident
Andrew Mountford Royal Holloway Neither agree nor disagree Confident
Well of course they have deteriorated, but by how much? i.e. what do you mean by “seriously”? As chronicled by Reinhart and Rogoff financial crises are associated with deeper recession and longer than average recoveries in the directly affected economies. Stock market crashes however do not necessarily cause financial crises and do not necessarily have such severe implications e.g. the bursting of the dot com bubble was only associated with a mild downturn in growth. The effects of the last East Asian Financial in the late 1990s caused huge drops in GNP in the East Asian economies directly affected but the financial contagion was largely confined to East Asia. Thus for me the implications for the world economy in general of the Chinese slowdown and stock market volatility depend on the vulnerability of the Chinese and Western banking systems to these events. The UK, EU and US regulators assure us that their banks have the capital to withstand such shocks. I hope they’re right.
Richard Dennis University of Glasgow Disagree Confident
Paolo Surico London Business School Disagree Not confident
Jagjit Chadha National Institute of Economic and Social Research Disagree Confident
The recoveries in the Anglo-Saxon economies continue to look rather robust. Given expectations of higher policy rates in the Anglo-Saxon world, the emerging economies will have to continue to deal with capital outflows and some will respond with better fiscal and financial structures, others perhaps not - so it will not be universally bad news. Parts of the Euro Area continue to suffer but that is not news this year. The fall in oil prices represents good news for consumers of oil and bad news for producers and traditionally this was thought either to be at least neutral globally or, more likely, positive given higher propensities to consume in advanced countries. So whilst the outlook may not be great it does not seem palpably worse.
John VanReenen London School of Economics Strongly Disagree Confident
Charles Nolan University of Glasgow Agree Confident
Costas Milas University of Liverpool Disagree Confident
Disagree in the sense that prospects might have deteriorated but not "seriously"
Gianluca Benigno London School of Economics Agree Very confident
The slowdown in China along with the fall in commodity prices are putting pressure on emerging market economies which are no longer a small fraction of world GDP. In an integrated world the spillovers from China and emerging market economies will probably cause a decline for the growth prospect of the global economy
Tony Yates University of Birmingham Disagree Not confident
I would say that they have deteriorated somewhat, but not 'seriously'. It remains to be seen whether the stock market correction goes any further, or starts to affect credit risk and therefore financial intermediation.
Christopher Martin University of Bath Agree Confident
There are enough indications from a variety of diverse parts of the world economy for us to be pretty sure that a slow down is on. But it is not the same as 2007-8: it originates in the real economy not in financial markets. A recession can probably be avoided with prompt policy action. But that is difficult. There is little scope for monetary policy as QE is not appropriate for a real economy recession, policy rates are close to the floor and forward guidance does not seem very powerful. And politics makes the best policy response, a fiscal expansion difficult. So there is a real danger that a lack of a proper policy response will allow a slowdown to become something worse.
Francesco Caselli London School of Economics Disagree Not confident
I don't see any changes in fundamentals but I accept that the psychological effects from the stock-market turbulence could have some significant effect on growth.
Morten Ravn University College London Agree Confident
There is a lot of uncertainty in the market which is impacting negatively on asset prices and commodity prices. Central bank policies that were rolled out in the aftermath of the financial crisis may paradoxically also have left the economy vulnerable to another bout of financial instability. There are also tensions in the middle east and major policy uncertainty such as the outcome of the UK's vote on the EU, the outcome of the next US Presidential elections etc. Addressing these uncertainties would be important for stabilizing confidence and markets and improving the short to medium run growth prospects.
Joseph Pearlman City University London Agree Very confident
The enormous level of non-performing loans in China seems now ready to precipitate a reduction in the growth of capital investment there. While I cannot imagine that growth will continue to be anything other than positive there, it is likely soon to drop well below 7%. This will inevitably impact on demand throughout the world, and will lead to lower growth almost everywhere.
Silvana Tenreyro London School of Economics Agree Confident
Michael Wickens Cardiff Business School & University of York Strongly Agree Extremely confident
This much is obvious. The next issue is how these developments will affect individual economies. The more dependent an economy is on exporting to China - such as Germany - and the more an economy depends on primary product exports - such oil or ores - the greater the impact.
Sean Holly Cambridge University Disagree Confident

Consequences for UK economy

Participant Answer Confidence level Comment
Ricardo Reis London School of Economics and Columbia University Neither agree nor disagree Not confident
The UK has a significant exposure to the EU, and the EU economy is speeding up, even if at a slower rate than one would like after the slump of the past few years. Likewise for the American economy, another important partner for the UK. Therefore, the slowdown in emerging markets is partly offset, and it is hard to forecast whether the prospects for the UK economy have gotten much worse (as opposed to just slightly worse) relative to a few months ago.
Wouter Den Haan London School of Economics Disagree Confident
I think there will be some negative effect, but I suspect it to be small.
Fabien Postel-Vinay University College London Neither agree nor disagree Not confident
Nicholas Oulton London School of Economics Disagree Confident
Low oil prices are a positive for the UK economy. Though they are bad for Scotland they make secession less likely, thus reducing political risk for the UK as a whole. The slowdown in emerging markets including China is obviously a negative for the UK but I would not expect it to be a major one quantitatively. The UK stock market is more of a worry since it may be a good indicator of confidence and the willingness to invest. But the FTSE 100 has been declining steadily since April last year (partly due no doubt to expectations of a rise in US interest rates), so there is no sudden change here.
Alan Sutherland University of St. Andrews Disagree Not confident
Martin Ellison University of Oxford Agree Confident
The UK is a mild net importer of hydrocarbons, so the fall in oil price should be marginally beneficial. Any possible positive effect of ultra-low oil prices is unfortunately likely to be dominated by growing risks in choppy world financial markets.
David Cobham Heriot Watt University Agree Very confident
It's clear that there will be a 'significant negative impact', but the nature of the risk to the UK's recovery is less clear, because that depends on how strong it is assumed that that recovery would have been otherwise. If the recovery is thought of as weak and anaemic (see wage levels and growth, GDP per capita, investment, exports, household debt, etc), then these factors may be responsible only for a limited further weakening.
Ray Barrell Brunel University London Strongly Disagree Very confident
The positive impact of low oil prices on the UK economy in 2015-16 should more than offset the negative impacts of lower equity markets and the slowdown in emerging markets. Lower oil prices have a clear and immediate positive impact on demand in the UK. Equity markets declines have a limited short term impact on demand as consumers take time to react to them, and firms do little investment through stock market issues. The weakening of sterling in recent weeks should more than offset any negative impact from emerging markets on trade, and these would be limited in any case. The UK is not a significant exporter to China and other emerging markets, unlike Germany and the US. Risks always exist, and threats to the solvency of UK based banks involved in Emerging Markets and China would pose a problem. However, those banks seem well capitalised, and this problem should not be part of a central scenario. The UK government, in any case, has significant space (and creditability) for a temporary fiscal response to any noticeable reduction in demand driven by banking sector problems.
Patrick Minford Cardiff Business School Disagree Confident
Basically my answer follows the analysis in my first answer which relates to the world economy. But for the UK the strengthening world background (in spite of the difficulties of some emerging market countries, mainly primary producers) will be positive. Low material prices are positive for UK consumers and investors. Share prices will recover as these things work through. N Sea oil is of course negatively affected; but positive effects elsewhere in the economy are much stronger. The UK recovery should continue.
Ethan Ilzetzki London School of Economics Disagree Not confident
I disagree partly because of the word "significant" in the question and partly because of the oil price part of the question. Low oil prices are a positive for the UK economy overall. If low prices are due to weak demand then they are an indicator of slow growth, but not primarily in the UK, and not a cause for the slow growth itself. The stock market wealth losses would be a drag on the UK economy, if they are persistent. It is hard to ascertain the magnitude of these effects at this point.
Michael McMahon University of Oxford Disagree Confident
As with the global economy, I see the main risks to the financial stability and think these remain muted (and as the Bank of England has said the banking sector can absorb related losses at the moment). The effect of lower oil prices should provide a reasonable boost to spending power in the coming quarters. In terms of more medium and longer term effects, the low oil price does reduce incentives for companies to implement green policies and transition to less reliance on oil which is a negative of low oil prices.
Paul De Grauwe London School of Economics Disagree Confident
Kate Barker British Coal Staff Superannuation Scheme Disagree Confident
I expect the impact to be modest - though it will make the fiscal arithmetic more difficult in March.
Sushil Wadhwani Wadhwani Asset Management Disagree Not confident
Once again, i disagree because i would expect the stimulative impact of lower oil prices to at least partially offset the impact of a modestly weaker global economy on the UK. However, i am not confident about this conclusion because of the downside risks to my modal projection coming from the possibility of a shock caused by significant capital outflows from China and/or further equity market weakness.
Akos Valentinyi University of Manchester Neither agree nor disagree Confident
Andrew Mountford Royal Holloway Neither agree nor disagree Confident
The UK regulators tell us that the UK Financial system is robust enough to cope with such shocks. I hope their modeling has been up to the task and in particular includes a feedback loop to the UK property market whose disproportionate presence on UK banks balance sheets poses a large and potentially systemic risk to the UK financial system. Hopefully the regulators’ confidence is well founded and if so the effect on the UK’s recovery, while obviously negative, shouldn’t be too severe.
Richard Dennis University of Glasgow Agree Not confident
Paolo Surico London Business School Neither agree nor disagree Not confident
Although the economic fundamentals may have not necessarily deteriorated in the last 6 to 12 months, the recent stock market turbulence may generate sufficient uncertainty for a significant portion of households and firms so as to induce them to postpone their investment decisions. By itself, this could risk the recovery anywhere, including the U.K.
Jagjit Chadha National Institute of Economic and Social Research Disagree Very confident
The falls in share prices may be temporary and a response to the understanding that monetary policy will eventually normalise, which itself tells us that the economy is in recovery. Lower oil prices help countries that are net consumers of oil and also help households real incomes. The slowdown in some emerging economies may not matter so much if the UK does not export a great there or if there continues to be growth in markets where the UK does trade. In any case, the final arbiter of short run trends in the recovery will the monetary-fiscal policy stance, which can always be loosened with forward looking policy by delaying the date at which interest rates are expected to rise and/or the surplus attained.
John VanReenen London School of Economics Disagree Confident
Charles Nolan University of Glasgow Neither agree nor disagree Confident
Costas Milas University of Liverpool Disagree Confident
Ir is more likely than not that we will see an annual GDP growth rate of less than 2.4% (which is what the OBR currently predicts) but still above 2%.
Gianluca Benigno London School of Economics Agree Confident
The FTSE is very much exposed to the commodity sector and the fall in oil prices and commodities puts pressure on the index. Moreover the nature of the UK economy, as a small open economy, will make it prone to outside development. Most likely these recent development will push forward any rate increase by the Bank of England and might force a rethinking of the current stance of fiscal policy.
Tony Yates University of Birmingham Neither agree nor disagree Not confident
It's too early to tell. For starters, the oil price fall, other thing equal, would be positive for the UK, as a net importer, and presuming that this also translates to falls in other wholesale energy prices like gas and electricity. Second, right now we don't know whether this is just noise, or a response to a slight reduction in growth prospects for China, or the harbinger of something much more serious.
Christopher Martin University of Bath Agree Confident
It probably won't affect consumption or investment greatly at this stage, but it will increase the current account deficit, which is already alarmingly large. But the global slowdown should not be used as an alibi for the underlying weaknesses of the UK economy. Productivity growth is low and a continual concern. This holds back wage growth,meaning that consumption growth is fuelled by excessive borrowing. A major factor in this dismal picture is the persistently low level of investment, something that shows no sign of improving. There is government investment in infrastructure; this needs to be extended and increased.
Francesco Caselli London School of Economics Disagree Not confident
Morten Ravn University College London Neither agree nor disagree Confident
I see many of these aspects as reflections of what is happening rather than causes. Commodity prices are low because of doubtful growth prospects and the same is the case for asset prices. Of course, should there be another crisis emulating what happened in 2008/09, the consequences could be very dire.
Joseph Pearlman City University London Agree Very confident
Share prices are showing an extreme reaction to recent events, and I would be very surprised if they did not to some extent recover. However the drop in oil prices presages high volatility in the cost of energy over the short to medium term, and such an environment of uncertainty will inevitably lead to lower investment. The weakness of emerging market economies will affect UK export demand, so overall I expect to see increasing problems for the UK's recovery.
Silvana Tenreyro London School of Economics Agree Confident
The slowdown in emerging market economies will affect, directly or indirectly, the global demand for UK goods and services and weaken the UK recovery. Low oil prices might prove beneficial to UK households and firms, but in all, the global demand effect is likely to dominate.
Michael Wickens Cardiff Business School & University of York Disagree Not confident
Being a net oil importer and not being greatly dependent on exports to emerging markets, the UK is in a relatively favourable position. The main downside has been the effect of China's slowdown on iron and steeel prices which have made UK production less competitive. Though even this will benefit the UK consumer in the longer term. The fall in stockmarkets reflects a composition effect arising from the contributions to the index of oil and steel stocks, together with the effects of greater uncertainty. The latter will pass soon.
Sean Holly Cambridge University Disagree Confident