experienced in recent years, labour productivity has not risen in tandem. the world is now at the cusp of path - breaking and fundamental technological changes – in the area of artificial intelligence, bio - technology, advanced analytics or ‘ big data ’, and fintech, just to name a few. but at the same time, labour productivity has been anaemic in major economies since the global financial crisis, which in the us, is currently experiencing the longest run of declining worker productivity since the 1970s3. tangible slowdown in productivity is also prevalent in many emerging economies since the global financial crisis. this is a disconcerting trend, as productivity growth is the bedrock of sustained improvements in standards of living and income. to borrow paul krugman ’ s quote, “ productivity isn ’ t everything, but in the long - run it ’ s almost everything ”. it ’ s a real challenge, to truly understand why this is happening. advocates of the secular stagnation hypothesis argue that this is a result of underinvestment in capital ; others point to declining business dynamism, excessive household debt that leads to the misallocation of resources, and some attribute it to measurement errors given the expansion of the digital economy. and then, there are those who question the productivityenhancing - value of recent technological innovations. what is the value of an apple watch as compared to the invention of the internet? it is indeed a challenge to comprehend this rapidly changing complex system that we operate in, let alone diagnose it. we need to humbly recognise the boundaries of our understanding for now, but at the same time relentlessly expand the frontier of thinking and conduct robust deliberation on the implication for public policy formulations. the last paradox, one that is familiar to many policymakers, a disquieting calmness. in the financial markets, the vix – a standard indicator to measure volatility in the global financial markets – is at its lowest in the last two years. in fact, it is close to the all - time low of below 10, last seen just before the global financial crisis. yet, a quick scan of financial news would reveal significant uncertainty in the global economy, amid an ongoing series of policy adjustments in major economies, volatile commodity price movements and geopolitical tensions. to a large extent, this paradox is an outcome of the combined policy efforts by central banks and governments worldwide to maintain stability since the global financial crisis. but beneath this

muhammad bin ibrahim : some thoughts on the new economy speech by mr muhammad bin ibrahim, governor of the central bank of malaysia ( bank negara malaysia ), at the malaysian institute of economic research ’ s ( mier ) 30th anniversary dinner, kuala lumpur, 26 september 2016. * * * distinguished guests, ladies and gentlemen, i am honoured to speak here at the malaysian institute of economic research ’ s ( mier ) 30th anniversary dinner. i would like to commend mier on the institute ’ s continuous efforts in expanding economic knowledge, and the commitment to research over the past 30 years. today, we meet at a time where the global economy is becoming increasingly dynamic and challenging, underpinned by complex global interlinkages and shifting trends. the challenges posed to policymakers are immense. the rapidly evolving world also necessitates swift, yet pragmatic policies in order for us to remain ahead of the competition. against this backdrop, a deep understanding of the core issues is absolutely critical in supporting evidence - based policy responses ; not only to manage risks but also to better leverage on opportunities. tonight, i will be sharing some thoughts about this “ new world economy ” that we are in, and along the way, share some policy insights and research ideas for the many economists and policy thinkers in this room. global macroeconomic environment is becoming increasingly challenging the periods of strong global growth have become something of a distant memory to us. global growth for the past 5 years has averaged 3. 5 %, well below the pre - crisis average of 5. 1 %. trade activity, which was once itself a catalyst of growth is now lacklustre. this was evidenced by the slower growth in global trade activity relative to global growth, as reflected in the decline in trade intensity from 1. 6 times between 2002 and 2007 to just around 1 time between 2011 and 2015. trade activity in the 1990s was driven mainly by trade of intermediate goods following the proliferation of global value chains, driven in part by the ict revolution. however, the expansion of global value chains has slowed with increasing on - shoring of manufacturing activity. global trade has also been dampened by weaker investment growth in several major advanced economies and china ’ s efforts in rebalancing its economy. given these cyclical weaknesses and structural shifts, the prospects for global growth and trade are expected to remain challenging going forward. in fact, the world trade organisation has projected for world trade to grow by only around 3 % in 2016 and