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George Osborne: Changes in global economy may create more market shockwaves

Published 22/01/2016

George Osborne will warn of the threats facing the global economy
George Osborne will warn of the threats facing the global economy

Major changes in the global economy could send further shockwaves through the markets, George Osborne will warn political and business leaders.

The Chancellor will say the combination of the slowdown in China's economy, the US interest rate rise and the collapse in oil prices have created a "hazardous mix".

But he will tell business leaders gathered in Davos that the risks can be overcome if every country acts to support growth.

Mr Osborne will say that "difficult and turbulent" transitions are taking place in China, the oil markets and in the US.

There are also "big forces at work as the demographics of many Western nations change, altering the balance between investment and savings".

The Chancellor will say: "'These are the shifting tectonic plates of the global economy. So since we all know they are shifting, we should also know that those shifts create tremors.

"The question is: how large will those tremors be? And the question for all of us here is: do we just talk about this transition - or do we take the action, and show the political will, to adjust to this transition and make it as smooth as possible?

"You will hear, here at Davos, any number of political leaders promise reform. What we need to see are the results.

"We need to see every shoulder at the wheel. Every country acting as one in search of growth."

Mr Osborne will repeat his warning of a "dangerous cocktail of risks from the global economy".

The Chancellor, 44, will say: "Everyone here in Davos is discussing China's slowdown and plunging oil prices. And here's a sobering fact: 2016 has been the worst start to a year for the financial markets in my lifetime. And I'm not so young any more.

"Oil is now under 30 dollars (£21) a barrel. Let's be clear: cheaper energy is helpful to many of you here, and to British families.

"But the speed of the drop has hit oil-producing emerging economies hard. And Iran - Opec's second biggest member - is now bringing on more supply.

"Long term that is good news, but we could all do with a little less of this volatility in our lives.

"Meanwhile, as corporate earnings seasons kick off in the US, there are reports it could be a weak one - with some people already querying the US rate rise.

"It adds up to a hazardous mix. But my message today is one of confidence: we can meet these risks and overcome them, if we stick to our plan."

He said the "best antidote for the dangerous cocktail" is "to offer concrete proposals on how the global economy needs to change, and explain how we plan to reform Britain's economy too".

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