Davos 2011: What can drive economic growth?

Mark Spelman

The key question at this year's World Economic Forum in Davos will be the state of economic recovery - is it sustainable or are the risks going to overshadow the green shoots, which returned in 2010.

The landscape is mixed - Asia, Africa, Latin America have grown strongly in 2010 while Europe and North America have struggled to address their government and household debt problems. The reality is many European economies have urgent domestic reform agendas driven by job losses, reducing the size of the public sector and financial restructuring.

These multiple demands on many Western Governments have challenged confidence and conviction in the West's ability to bounce back and recover.

Opportunity 1: old age

Whilst the downside risks are very real for many economies, so are the growth opportunities, which are frequently overlooked under the weight of short-term financial retrenchment.

If countries can tap into the potential of ageing populations, growing resource scarcity and new technology advances, there are prospects for job creation and accelerating growth. Too often demographics, resources and technology are regarded as problems rather than opportunities.

Elderly shoppers in Japan An opportunity for economic growth

For example, the 'silver economy' is a growing and dynamic market segment that demands more attention from business. The number of elderly people is increasing; the UK for example expects to have 17% more people aged over 60 in the next 10 years alone. As life expectancy significantly increases, so will their demand for new products and services.

This group will look for new healthcare products - especially diagnostics to predict and prevent illness, new financial products to access equity and cash more easily for later life, and more opportunities for travel and tourism.

Opportunity 2: scarce resources

There are new opportunities to be found in the resolution of resource scarcity. With the global population due to increase by a billion people over the next 20 years, the demand for resources will continue to rise.

The recent increase in oil prices is a timely reminder of the pressure on the supply of resources. This extends not just to energy but to other commodities, from iron ore to rare metals and critically, food and water.

The pressure from demand for these resources will create major new opportunities for growth. In energy, the need to diversify away from fossil fuels will continue, creating new opportunities for renewables and micro generation. The first big wave of electric vehicles is upon us as cities look to cut emissions and make public and private transport greener and cleaner.

The aspirations of the new middle classes in many emerging economies will open up opportunities for new agricultural businesses and improved food distribution. Resource scarcity will fuel innovation as we develop new approaches to secure economic growth with better and more efficient use of limited resources.

Start Quote

At a time when it is easy to be engrossed with the challenges debt, now is a timely reminder of some of the new waves of growth that will create the opportunity to accelerate recovery. ”

End Quote
Opportunity 3: Technology

Industries including education, chemicals, public services, transport and consumer goods will be transformed by the advent of new technologies. Communications will shrink the globe, with two billion people now having access to the internet.

The technology revolution will be driven by cloud computing, superfast broadband, robotics, mobile sensors and analytics. More applications on our mobile devices, more people using the internet and better use of data will lead to major new growth opportunities.

At a time when it is easy to be engrossed with the challenges of sovereign and household debt, now is a timely reminder of some of the new waves of growth that will create the opportunity to accelerate recovery.

The debt-fuelled consumption of the last decade has disappeared. It is those countries and companies that embrace and take action to take advantage of these new waves of growth that will give them the best chance for sustained recovery and long-term growth.

Davos provides a forum for global leaders to openly and actively discuss those opportunities as well as the challenges. The hope is that the prospects for growth can be turned into more of a reality during the next 12 months.

More on This Story

The BBC is not responsible for the content of external Internet sites

More Business stories

RSS

BBC Business Live

  1.  
    LENDING Via Email Howard Archer, chief UK and European economist at IHS Global Insight

    writes: "The Bank of England found small- to medium-sized enterprises operating in sectors like house building or leisure continued to struggle to obtain finance." He adds: "It is vitally important for sustained, balanced UK growth that all companies who are in decent shape and who do want to borrow - whether it be to lift investment, explore new markets or generally support their operations - can do so, and at a non-punishing interest rate. This applies to all companies, whatever their size."

     
  2.  
    10:47: HOUSE PRICES

    Rightmove's latest asking price data for England and Wales suggests home owners are asking 2.6% more for their property this month compared with the previous month. That takes the average asking price to £271,669 on average. Believe it or not the rise in asking prices this months is the slowest for the time of year since 2008.

     
  3.  
    10:31: HOUSE PRICES
    Graph showing changes in property asking prices over the last year

    There's a little more on house prices today. According to property website Rightmove house price growth in the South East is set to surge in the next few years as London buyers look outside the capital. It is tipping Southampton, Luton and Brighton as hotspot after seeing signs of the ripple effect of house hunters who have been priced out of London.

     
  4.  
    10:19: CHINA MOBILE

    China Mobile the nation's largest telecom provider, said net profit for the first nine months of 2014 fell 9.7% to 82.6 billion yuan (£8.38bn,$13.49bn) amid rising competition from rival carriers and Internet-based service providers.

     
  5.  
    10:01: MORTGAGE LENDING
    A row of terraced houses in south London

    Mortgage lending for the three months to the end of September was £55.5bn. That's 8% higher than the previous three months and 13% higher than the same period a year earlier. So, not a huge amount of evidence of a slowdown in the property market, really. Bank of England chief economist Andrew Haldane's comments that interest rates might not rise until after the general election may also mean people feel a little less nervous about taking out a mortgage. But then again, if stock markets continue to tumble then mortgage activity might slow as confidence evaporates. Serious question: Who'd be an economist?

     
  6.  
    09:53: MORTGAGE LENDING

    Mortgage lending in September stood at £17.8bn - 1% lower than August's £18bn figure, but still 10% higher than the £16.2bn advanced to mortgage borrowers in September 2013, the Council of Mortgage Lenders (CML) has said. The body which represents 95% of mortgage lenders in the UK reckons uncertainty about the timing of an interest rate rise by the Bank of England was one of the key factors in the slight slowdown in lending.

     
  7.  
    09:35: ROYAL MAIL JOBS
    Royal Mail staff at the St. Rollox sorting office in Glasgow,

    Incidentally, Royal Mail has also started its annual recruitment drive to help with the Christmas post, saying 19,000 temporary jobs will be available. Now all we need is the first Christmas ads and John Lewis to put its Christmas decorations up in store, and we're all set for the traditional retail frenzy that embodies the spirit of the festive season. That's right, isn't it?

     
  8.  
    AMAZON JOBS Via Twitter Ben Thompson Business correspondent, BBC News Channel

    tweets: "Amazon to create 13,000 seasonal jobs in run up to Christmas. On busiest day last year, customers ordered 4.1m items - 47 every second."

     
  9.  
    09:07: SAP DOWNGRADE

    German software developer SAP has fallen 3.9% this morning in Frankfurt after letting on that 2014 profit will be lower than previously forecast. Services in the cloud are putting pressure on profits.

     
  10.  
    08:50: FORD INVESTMENT Radio 5 live

    Ford is investing about £200m at its Dagenham plant creating about 300 jobs to make diesel engines. Mark Ovenden of Ford is on 5 live. Engines are Britain's strength in vehicle manufacture, he says.

     
  11.  
    08:39: MARKET REPORT

    The FTSE 100 is behaving a bit oddly in early trading. It opened up 8 points this morning then promptly remembered the eurozone is teetering on the edge of a third crisis and there's less global economic growth out there and fell again. Now it's up 3 points again at 6313.64 . The situation is a bit worse for Germany's Dax - down 52 points to 8797.85 - and France's Cac-40 - down 23 points to 4010.12.

     
  12.  
    08:28: TAX MARK

    SSE is touting its award of the new Fair Tax Mark, which has been set up to show companies are being open about what tax they pay. Other recipients include Go-Ahead Group , Midcounties Co-operative, Phone Co-op and Unity Trust Bank. Margaret Hodge, chair of parliament's Public Accounts Committee, said she hoped other companies would follow SSE's example.

     
  13.  
    08:16: PONTOON CYCLING
    Computer generated image of the floating cycle route

    Is the floating bike path a sustainable solution or an expensive distraction? We think you probably just need to look at the picture (above) for the answer to that question. But if you really feel the need to read about one of the more outlandish proposals being considered by Mayor of London Boris Johnson then by all means take a look. Some have baulked at the £600m price tag. But no doubt the team behind the 'Thames Deckway' thought "Boris. Keen Cycler, loves things that float (think airports), it's bound to be a winner."

     
  14.  
    08:00: SHIRE FINANCE CHIEF EXIT

    Drugs firm Shire has announced that interim chief financial officer James Bowling has resigned after ten years with the firm. He is joining Severn Trent as CFO and will leave Shire at the end of March 2015. Shire saw more than 30% of its share value wiped out last week after the collapse of a £32bn takeover from US rival AbbVie. Shire will start the search for a new CFO immediately.

     
  15.  
    07:45: SPIRIT PUB OFFER
    The badge of Greene King brewers on a pub wall

    Spirit pub company, which runs about 750 pubs, says Greene King has made a better offer to take the company over. They would get 0.1322 Greene King shares per Spirit share and a cash payment of 8 pence, worth a total of about 109.5 pence. Spirit's board says it may recommend the offer once a few details have been ironed out.

     
  16.  
    07:33: BUDGET GIVEAWAY?
    Chancellor of the Exchequer George Osborne

    Don't expect any traditional tax giveaways ahead of the general election. In a move akin to "good luck, there's no money left", Cabinet ministers have been warned by the Treasury that it is likely they will have to rein in their spending in the run-up to the election because of a shortfall in tax revenues and concerns about the global economy, the Financial Times has reported today. Treasury secretary Danny Alexander has told the Cabinet tax revenues are not recovering as quickly as the economy so he might have to impose new spending controls in the Autumn Statement. Yikes.

     
  17.  
    07:21: BANK OF JAPAN

    Japan's central bank has maintained its economic assessment for eight of the country's nine regions in its quarterly report, saying they continue to recover. The north-eastern Tohoku region cut its assessment from July, to say that the recovery trend is slowing.

     
  18.  
    07:07: IBM NEWS
    chip

    IBM says it will make a "major business announcement" today. Various newspapers including the Wall Street Journal think it will sell off its loss-making microchip-making business. IBM will pay Globalfoundries $1.5bn (£931m) to take the chip operations off its hands, says the WSJ.

     
  19.  
    06:50: UK GROWTH BBC Radio 4

    Peter Spencer, economic adviser to the EY Item Club, tells the Today programme housing investment along with business investment has been responsible for "about half of the economic growth" we have see in the UK since the start of the recovery. But people are beginning to worry about global growth and the UK's economic outlook. Concerns about economic developments at home and abroad has meant there are already signs of "a return to caution by both borrowers and lenders in the mortgage market".

     
  20.  
    06:35: STOCK MARKET TURMOIL BBC Radio 4

    Last week's stock market sell off is on the business agenda today. "Everyone was feeling nervous. We just need a very small straw to break the camel's back I think it was the Ebola virus," James Bevan chief investment officer at CCLA Investment Management tells the Today programme. "We had a lot of other things going on but I think Ebola was the thing that made investors say to themselves 'let's sit this one out'. There has been no real change in the hard economic data." He is worried about bond yields spiking "as they did in 1987" though.

     
  21.  
    06:24: EUROZONE ECONOMY Radio 5 live
    Jose Manual Barroso

    Jose Manual Barroso, outgoing President of the European Commission, has told the BBC he doesn't think another recession in the eurozone is likely. Official statistics suggest a "weaker recovery than anticipated. Elmar Brok, a German member of the European Parliament is on Radio 5 live and says Britain should be "more positive towards the eurozone"

     
  22.  
    06:13: INTERN PAY Radio 5 live

    Christian May from the Institute of Directors is on 5 live talking about employment reform, including reforms to how interns are paid, or otherwise. "It's worth considering it's unlikely to be a silver bullet," he says. There's a chance restrictions could be gamed to allow employers not to pay interns. While 25% of businesses have interns they don't pay, "in this day and age its getting difficult to justify having someone work for them and not paying them."

     
  23.  
    06:03: ETHICAL INVESTMENTS Radio 5 live

    Justin Urquhart Stewart of 7 Investment Management is on 5 live talking about ethical investment. "It's very badly marketed so people don't understand it ," He says. But because such investments strip out companies such as tobacco, alcohol, arms and oil, returns can also be slim.

     
  24.  
    06:01: Howard Mustoe Business reporter

    Good morning. Get in touch via email bizlivepage@bbc.co.uk and twitter @BBCBusiness.

     
  25.  
    06:00: Matthew West Business reporter

    Morning folks. It's a gloomy start to the day with the EY Item Club downgrading its 2015 UK economic growth forecast quite sharply this morning as a result of the global slowdown and uncertainty over interest rates. There's more housing market data out later and the Prime Minister is going to be pushing for more apprenticeships today too. We'll bring you more as it happens.

     

Features

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.