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Potential
Actual
Actual forecast
Po
ten
tial o
utp
ut
level
Years
No loss in potential output
level after some time
A
B
C
Pre-recession potential forecast
Post-recession potential forecast
Actual
Actual forecast
Po
ten
tial o
utp
ut
level
Years
Permanent loss in
potential output level
Pre-recession potential forecast
Post-recession potential forecast
Actual
Actual forecast
Po
ten
tial o
utp
ut
level
Years
Post-crisis
potential GDP
Pre-crisis
potential GDP
-10
-8
-6
-4
-2
0
0 1 2 3 4 5 6 7 8 9 10
Impact on GDP - for all crises
Imp
act
on
po
ten
tial G
DP
(%
)
Time (in years) following the crisis
99%
confidence
band
-10
-8
-6
-4
-2
0
0 1 2 3 4 5 6 7 8 9 10
Impact on GDP - severe crises
Imp
act
on
po
ten
tial G
DP
(%
)
Time (in years) following the crisis
99%
confidence
band
-10
-8
-6
-4
-2
0
0 1 2 3 4 5 6 7
To
tal im
pact
on
po
ten
tial G
DP
(%
)
Time (in years) following the crisis
-10
-8
-6
-4
-2
0
-1 0 1 2 3 4 5 6 7
To
tal im
pact
on
po
ten
tial G
DP
(%
)
Time (in years) following the crisis
-6
-4
-2
0
2
4
-1 0 1 2 3 4 5 6 7
Labour force participationCapital–labour ratioTotal factor productivityEmployment rate
Imp
act
on
po
ten
tial G
DP
(%
)
Time (in years) following the crisis
-40
-30
-20
-10
0
10
-1 0 1 2 3 4 5 6 7
Consumption
Investment
Imp
act
on
po
ten
tial G
DP
(%
)
Time (in years) following the crisis
-40
-30
-20
-10
0
10
-1 0 1 2 3 4 5 6 7
Exports
Imports
Imp
act
on
po
ten
tial G
DP
(%
)
Time (in years) following the crisis
0
2
4
6
8
10
12
14
1971Q2 1981Q2 1991Q2 2001Q2 2011Q2
Actual
NAWRU
Un
em
plo
ym
en
t ra
te (
% o
f la
bo
ur
forc
e)
Time
Forecasts
-2
0
2
4
2001 2004 2007 2010 2013
Labour
TFP
CapitalCo
ntr
ibu
tio
ns
to p
ote
nti
al G
DP
gro
wth
(%
year-
on
-year)
Forecasts
100
105
110
115
120
125
2007 2009 2011 2013 2015
HMT Budget 2008HMT PBR 2009Barclays 2008Barclays 2009
Tre
nd
ou
tpu
t (J
an
20
07
= 1
00
)
Year
