Date posted:
Tue 28 February 2023
Our corporate finance director, Stephen Gregson, has shared his opinion on the latest economic news.
Last week, the IMF published a blog, written by the head of the IMF, Kristilina Georgieva. The title of the insight sheds light on the focus of the blog “Policy Priorities for the G20: One Earth, One Family, One Future”.
This title is important because this is where a lot of its power lies. This is something that we accountants can be accused of not ‘getting’ it is equally important how a message is crafted as well as it’s content.
This applies to all areas of life; an obvious one being a business’ strategy and goals.
Whilst most modern organisational goals follow the SMART framework, the goals that are set through this framework rarely have any meaningful emotional appeal. The emotional ‘capital’ of a message is often the prime mover to action.
Emotion is what makes us human, so the messages we provide to our stakeholders, our call to action, are unlikely to be very effective if they have had emotional capital stripped out of them.
But back to the blog, it says, and the IMF often repeats this, that its future growth forecasts are heavily underpinned by assumed levels of growth from emerging markets (on the basis that more mature markets tend to experience slower growth, which is an interesting idea for us to reflect upon in the UK given our seemingly low levels of growth relative to our peers).
Nothing particularly new in this message, but what might be very interesting to some UK businesses is the extent to which that growth represents a new or expanding market for their products or services, and if it does, how to access it.
As readers of previous blogs might recall, I tend to see life, the world and everything as a series of Venn diagrams – i.e., whatever the particular question, topic or issue at the centre is, it is influenced by lots of factors and actors. And so, it is here. There might be export growth opportunities here for UK businesses – but how are these impacted by the idea that the last few years, we have been seeing ‘peak globalisation’? None of us can answer this question (and others like it) in a general holistic way other than to simply say (somewhat unhelpfully) – it depends.
As ever with economics there are usually good and bad aspects to everything. If emerging markets do experience this growth, will that lead to greater demand for commodities and energy and hence sustain (or, even worse, give an unwelcome boost) global inflationary pressures? If it does, how will central banks react to this?
Base rate rises in the UK aren’t going to have any useful impact on globally driven inflationary pressures, but if UK inflation proves ‘persistent’ (the Bank of England uses that word a lot) then the chance of base rate rises (or, at best, no reductions) are much greater.
This is something we have touched upon before, that base rate rises can be an incredibly blunt tool when the inflationary pressures are driven by external, and often geo-political, factors.
There is an argument that it would be better for the economy if a central bank could be allowed to be a little more nuanced in its base rate decision-making. Successful businesses know the importance of nuance. They don’t see the world as starkly painted in discrete blocks of primary colours, it is awash with shades.
And that is perhaps a useful way of thinking about their way of thinking. It is successful because it is subtle, creative, and nimble. For want of a better word or idea, their thinking is successful because it is playful. And if you aren’t convinced of the value that playful, creative thinking could bring to your business challenges perhaps it’s worth reflecting on the statement ascribed to Einstein who noted that the way of thinking which has got us to a particular problem is unlikely to be adequate at designing a solution, we need a perspective shift.
Reading things like the IMF blogs can be a way of prompting that perspective shift. What could be the positive impact of, every time we see, experience, or hear something new we run it through a mental filter of “hmm that’s possibly interesting; how could that help me with issue/problem/opportunity X, Y or Z?”