Andrew Bailey on Economy
TL;DR
Andrew Bailey views the world economy as resilient but facing structural headwinds that require technological innovation and global cooperation to solve.
Key Points
Andrew Bailey views AI and robotics as the likely next General Purpose Technology capable of moving the dial on productivity and economic growth.
He asserts that reversing trade openness, such as through tariffs, negatively impacts economic growth, referencing Adam Smith's model.
In February 2026, he characterized the world economy as resilient but noted that the IMF's outlook was tilted to the downside due to geopolitical, trade policy, and fiscal risks.
Summary
Andrew Bailey, in his capacity as Governor of the Bank of England, emphasizes that the global economy has demonstrated resilience despite high policy uncertainty, geopolitical risks, and significant supply-side shocks like Covid and trade tariffs. He notes that while inflation has been manageable recently, the cost of living remains a concern in several nations. His analysis stresses that current macroeconomic frameworks are less equipped for supply-side challenges compared to demand-side issues, highlighting that global financial conditions have been relatively accommodative, though there is a risk of complacency in financial markets.
He details five structural economic backdrop areas: the shift to larger supply-side shocks, declining potential growth rates in advanced economies driven by productivity stagnation, the drag of an ageing population on labour supply and fiscal health, headwinds to growth from reversing trade openness, and the evolution of the financial system. Bailey identifies Artificial Intelligence and robotics as the most promising next General Purpose Technology to potentially reverse the decline in productivity growth, stressing that growth enhancement requires time, investment, and training. He argues that maintaining global economic openness and robust international financial institutions is essential to addressing imbalances and supporting long-term growth prospects.
Frequently Asked Questions
Andrew Bailey sees the world economy as currently resilient but constrained by structural issues like slowing productivity and ageing populations. He believes sustaining long-term growth necessitates focusing on innovation, particularly through new General Purpose Technologies like AI.
The Governor has carefully avoided taking a political position on Brexit, but as a public official, Andrew Bailey maintains that trade restrictions, such as tariffs, have a negative impact on economic growth, citing historical economic models.
He identifies several deep structural challenges, including the lower potential growth rate of advanced economies over the last fifteen years, driven by productivity stagnation, and the pressure on fiscal positions from ageing populations.
Sources4
The world today – remarks by Andrew Bailey
Andrew Bailey: The world today
Open letter to Bank of England's Andrew Bailey
* This is not an exhaustive list of sources.