“Longer term, you will get some adjustment. Trade does adjust, it does rebuild,” he said addressing the 40th G30 annual International Banking Seminar in Washington, DC.
Investment in innovation and new technologies may help address the decline in productivity growth in the long run, Bailey said.
The United Kingdom’s potential growth rate declined from 2.5 per cent to 1.5 per cent over the past 15 years, he noted, attributing the trend to lower productivity growth, an ageing population and trade restrictions, including post-Brexit economic policies.
Though artificial intelligence (AI) is likely to usher in a breakthrough in long-term productivity, it may “in the current circumstances, be a risk to financial stability through stretched valuations in the markets”, he cautioned.
“It doesn’t undermine the fact that AI, in my view, is likely, in addressing this slower growth issue, that we have and the consequences of it—that it is actually the best hope we have, and we really do need to do all we can to foster it,” he added.
ALCHEMPro News Desk (DS)
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