The economic outlook

One of the first things that I did at Drupa was to listen to a keynote presentation at the Drupa Cube by the British economist Vicky Pryce on the state of the world’s finances. I wanted to have a good grounding in the economic realities before spending the rest of the week looking at expensive high tech printing solutions, on the basis that part of understanding how any technology works is to figure out the economic model around it.

Pryce is well placed to give this sort of overview since she is currently Chief Economic Advisor at the Centre for Economics and Business Research, where she is also a board member. In addition she is a Visiting Professor at Birmingham City University and King’s College, London and was previously joint head of the UK Government Economic Service.

She started off by noting: “We have had one financial crisis after another. We had the financial crisis back in 2008/9 which required action from government.” She argued that a lot of the recent global economic problems stem from the debt that this caused, adding: “And we had to do this again and even more so at the time of the Covid pandemic.”

Debt ratio

The pandemic led to a massive drop in world GDP of around 3.4 percent, though most economies are starting to recover now. However, as she noted: “The world managed somehow through a lot of help but it left a lot of issues that have to be dealt with.”

Pryce says there was a very substantial increase in borrowing. In the US, for example, 25 percent of the country’s GDP was reborrowed and injected into the economy to keep people going. Similar actions were taken in other countries, including the UK where the figure was just under 20 percent.

So how were the world’s economies able to do this? She explained: “The monetary institutions had a lot to do with this. They had to sell debt and inevitably the central banks would buy that debt and its value would increase.”

As a result debt increased everywhere, both corporate and personal. She continued: “People could borrow at very low interest rates which they could manage at the time. But now the interest rates have gone up.”

According to Pryce, most countries are now running a very high debt-to-GDP ratio. The EU suggested this should be limited to a 60 percent ratio but she says that most European countries have gone above this, and some countries have gone much further, such as Japan, which is operating at a ratio of between 150 and 250 percent. She argues that this is storing up problems for the future, saying: “The US can buy debt in its own currency but other countries have to borrow in other currencies. And people worry if this is sustainable.”

“the companies that survive and do well are the ones that invest and innovate in those conditions.”

Vicky Pryce

She says that central banks have recently been reducing their borrowing but that this gives governments less room to manoeuvre, noting: “They sell the debt so the yield goes up and so long term rates and mortgages also go up. So the central banks are now selling less debt back.”

To complicate matters, the various economies are not all recovering at the same rate. She says that of the G7 economies, the UK and Germany are struggling the most but that economists expect the German economy to improve quicker. She added that those countries that were more energy self-efficient tend to have better GDP figures because they have recovered faster.

Recovery

Pryce pointed out that business confidence is returning despite some continuing challenges, such as the war in Ukraine, the sanctions that followed, and the uncertainty caused by having many elections in different countries this year. Nonetheless, people expect that interest rates will go down, and therefore also inflation. She noted: “Inflation is improving but costs are still quite high. Debt is unsustainable in the longer term.”

She says that container prices are starting to go up while oil prices are relatively stable. However, she identified a number of other problems, noting: “De-globalisation was happening throughout the 2010s, in the aftermath of the financial crisis and has accelerated since the pandemic.” She added that the growth in Chinese exports affects the whole world. 

She pointed out that many advanced nations were having to cope with ageing populations while a developing middle class in emerging markets is driving more demand in those countries, which includes more demand for packaging. 

The use of Artificial Intelligence technology also raised questions, including whether or not we should be using more AI and more technology to get through all these issue so that we can get to market quicker.

She also pointed out that real wages are starting to go up again and said that consumers do have a good idea of their finances because they have been through so many issues since 2008. But she pointed out that working habits changed a lot during the pandemic, which has led to some labour issues, saying: “There is a lot of inactivity as people have stopped working as they rethink their lifestyles.”

Outlook for printing

Pryce says that despite the current economic climate, forecasts suggest that there is still room for a lot of growth in the printing industry, noting that “the companies that survive and do well are the ones that invest and innovate in those conditions.”

“The print industry is truly global and the supply chains are global and this helps to survive all the current issues.”

Vicky Pryce

She also pointed out that there were more stories in national newspapers on printing including a recent report in The Times on textile printing. She said: “The print industry is truly global and the supply chains are global and this helps to survive all the current issues.”

She continued: “I think the print industry is able to survive. You have been investing to get over the various issues like energy and skills. You seem to be much more agile than other industries.” She added: “This event itself proves that the print industry is alive and kicking.”

Pryce says that she is hoping now for a drop in interest rates to promote more growth, adding: “If you don’t get investment then you don’t get innovation, and interest rates are very important in that. In my view they have been too high for too long and the more clarity we have on this the better.”

In wrapping up, she noted: “I think that we are more prepared to react to global pandemics. We have made some mistakes, lock downs may have been overdone, but the medical industry has made big improvements.” Pryce concluded that the markets are more confident: “There seems to be a belief that we have learned from all this.”


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