UK Economic Growth To Outpace Europe’s Over Next Two Years Forecasts IMF
It may not have an infallible record when it comes to its economic forecasting, though who does, but Brexit-bothered Brits will take some comfort in this week’s latest IMF forecast for the global economy. International economic growth across the world may have been revised down to 3.5% for 2019 from the previous IMF prediction of 3.7% on heightening risks associated with slowing growth in China and the disruption in Europe caused by Brexit. But the forecast for economic growth rates in the UK itself was held at 1.5% for this year, growing incrementally to 1.6% in 2020.
Significantly, especially if you are a little cheesed off at the Eurocrats and politicians seemingly intent on making us suffer over the Brexit decision by taking a hard line in negotiations, that rate is superior to the prospects seen for major nations in the single currency block. Germany and Italy were particularly highlighted as being expected to face a tough couple of years of sluggish economic growth, which was significantly downgraded for both. In fact, of the G7 club of economically advanced nations, only the USA and Canada are forecast to see better growth than the UK. Germany’s growth forecast was cut from 1.9% to 1.3% and Italy’s from 1% to 0.6%.
However, a dampener on the IMF forecast is that it comes with one potentially crucial caveat – the UK reaches a Brexit agreement with the EU. If a deal is struck and a smooth transition period agreed upon, Britain’s economic growth will benefit from a bounce back effect after more than 2 years or Brexit uncertainty. Some of the growth we’ve missed out on since the referendum in June 2016 will be recuperated, helping drive us ahead of many of our big European neighbours. French growth is forecast to be roughly the same as that in the UK.
However, if a no deal Brexit is the final result to the excruciating chaos that has unfolded in Parliament over the last several months, the will have a severely damaging impact not only on the UK but world economy, says the IMF. It was highlighted, along with the U.S.-China trade war and slowing economic growth in China more generally, as one of three major risks to the global economy this year. High levels of debt currently in place, particularly in emerging markets, is also a systemic risk.
The IMF does not believe that a global recession will inevitably solidify over 2019, despite recognising that risks are currently ‘weighted to the downside’. An easing of these risks could also release economies from pessimism, driving new growth.
For those investing online, almost any Brexit breakthrough that does not include the no deal scenario, could prove a significant opportunity to record gains from UK equities. They are seen by many as currently undervalued in comparison to peers in other developed market as a result of the Brexit-provoked sell-off over the last couple of years. Once uncertainty is removed and a way forward set out, there is a good chance valuations on the London Stock Exchange will, reflecting the economy as a whole, rebound to recover some of their Brexit uncertainty losses.
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