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United Kingdom Economic Forecast

UK Economic Forecast

March 3, 2020

The economy flatlined in the final quarter of 2019 according to recent data, amid a contraction in fixed investment and soft private consumption. In contrast, the external sector contributed strongly to growth, although this was likely due in part to temporary factors flattering exports. Turning to 2020, available indicators suggest a stronger start to the year. Both the manufacturing and services PMIs averaged notably higher in January–February compared to Q4, amid a reduction in political uncertainty following the elections, while retail sales rebounded in January. However, PMI survey respondents highlighted that the COVID-19 outbreak had dampened demand from Asia, and the virus will likely continue weighing on the external sector in the months ahead. In politics, the UK and EU began formal trade talks on 2 March. The talks are set to prove difficult, with areas such as fishing rights and the UK’s ability to diverge from EU regulations likely to be particular sticking points.

United Kingdom Economic Growth

Growth should be modest this year. While a more expansionary fiscal stance should support activity, uncertainty over the future UK-EU trading relationship will cap business investment, while the coronavirus outbreak will weigh on exports. A possible unravelling of trade negotiations with the EU and a worsening of the viral outbreak pose downside risks. FocusEconomics panelists project GDP growth of 1.0% in 2020, which is unchanged from last month’s forecast, and 1.4% in 2021.

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United Kingdom Facts

Value Change Date
Bond Yield0.83-3.04 %Jan 01
Exchange Rate1.33-0.35 %Jan 01

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