Per Callesen: Growth rates, reforms and risk of overheating

Speech by Mr Per Callesen, Governor of the National Bank of Denmark, at the 3S' board seminar, Copenhagen, 2 October 2017.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Economic growth is a subject of frequent debate. This paper elaborates on why future growth in the gross domestic product, GDP, can be expected to be lower than that seen in recent decades. The short-term risks of overheating are then discussed, and whether structural reforms could potentially counter them. Finally, there is a box on the interpretation of growth rates.

What is a realistic growth rate in the long run?

Potential output in a society, i.e. its economic capacity, is determined by the amount of work performed, the size of the capital stock available and how "smartly" people work (productivity). Increased economic activity creates a basis for higher demand, but demand for goods and services can also be covered via imports.