These concerns about growth prospects have been reflected in financial market volatility since the turn of the year.Global stock markets had their worst six-week start to the year for more than 45 years, with over trillion wiped off world markets.Headline measures include: These economies face a number of risks.As China rebalances towards domestic consumption, the emerging markets whose exports are geared to China’s previous manufacturing and investment-led growth are suffering.As a result, the deficit at 3.8% is forecast to be down by almost two thirds from its peak, bank capital ratios have doubled and there are over 2 million new jobs since 2010.Had the government not taken action to reduce the structural deficit from its 2009-10 level, cumulative borrowing would have been £930 billion higher in 2019-20.And after a decade of cheap debt, emerging markets are facing tighter credit conditions.Over 5 billion in capital flowed out of emerging markets last year.
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All this means the challenge of delivering a sustained rise in living standards following the financial crisis is greater here in Britain than the Office for Budget Responsibility () had previously forecast.
This is precisely why the UK has been working through its long-term economic plan.
Since 2010 the plan has been focussed on reducing the deficit, while delivering the supply side reforms necessary to improve long-term productivity growth.
That has allowed an active monetary policy to support the economy while ensuring the fiscal position is sustainable in the long term.