The last cycle from 1997H1 to 2006H2 saw robust growth in potential output of 2.9% a year. This was the product of a combination of exceptional factors, including strong net inflows of migrants, a decline in the NAIRU, substantial capital deepening and a shift towards high value-added sectors such as financial services. However, we expect growth of just 1.8% a year between 2006H2 and 2018H2; this is partly due to the legacy of the recession, but also because the influence of these exceptional factors will ebb away. Even after 2011, when the recovery has become entrenched, we project growth of just 2.3% a year.
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