Andrew Sentence is a former member of the Bank of England Monetary Policy Committee, the body responsible for setting UK interest rates. He is now Senior Economic Adviser at PwC and his latest book Rediscovering Growth, is part of the Perspectives series.
He spoke to the Prospector on a range of economic subjects, ranging from domestic concerns to macroeconomic policy. What follows is the concluding section of that interview
Jay Elwes: Are you worried by what is happening in emerging markets, including Turkey, China and Argentina? Do you see a re-ordering here?
Andrew Sentance: There are a number of things going on in emerging markets at the moment. First of all, I don’t think anybody can really put their hand on their heart and say they expect to see fast growing economies like emerging markets that don’t have economic cycles. So we have to allow for the fact that economies will have cycles, even if they have faster rates of growth on average, they’ll have some periods when that is particularly strong, and then they will have other periods of weaker growth. And part of what’s happening in China is to do what that. China, I think, has strong economic fundamentals with some cyclical movements. But they have said that they want to get their longer-term growth rate down to more sustainable 7.5 per cent, and I think that’s a recognition that as the development of the economies continues, growth rates do tend to slow down (if they continue to develop satisfactorily).
So that’s one thing—we’re bound to see cycles in emerging markets. I think the second thing that’s happening is perhaps we should be more discriminating when we look at emerging markets; not all emerging markets are the same just as not all western economies are the same. Some Western economies have potentially better growth than others. The United States and Northern Europe potentially have better growth potential than southern Europe at the moment. Hopefully southern Europe will come through some of its problems. And so there will be emerging markets from time to time that have less good growth fundamentals or where there are broader political-economic problems that haven’t been solved.