Real GDP growth in the UK economy has outperformed most major developed states in recent years, and after a slowdown in 2016 in part driven by 'Brexit' uncertainty, will continue to surpass the eurozone over the medium term.
In light of positive structural economic reforms undertaken by the government, coupled with flexible monetary and exchange rate policies, we remain bullish on the long-term economic prospects for the UK relative over the longer term.
Major Forecast Changes.
We have revised down our real GDP growth forecast in 2016 to 1.8%, from 2.5% previously, on the back of weaker global growth and drag on confidence from the UK's upcoming referendum on EU membership.
Downside Risks To Medium-Term Growth: There are downside risks to our economic growth forecasts, particularly stemming from the impact of fiscal consolidation, persistent weakness in the eurozone economy, and ongoing headwinds facing global emerging markets.
Brexit Risks Still Underpriced: We believe there is a non-negligible chance that the British electorate will vote to leave the EU at the upcoming referendum, which poses material risks to the UK's growth and investment outlook, as well as the performance of a number of sectors including banking, chemicals and the automotive industry.
|e/f = BMI estimate/forecast; Source: BMI/ONS|
|Nominal GDP, USDbn||2,991.8||2,848.5||2,725.6||2,870.4||3,181.2|
|Real GDP growth, % y-o-y||2.9||2.3||1.8||2.2||2.4|
|Consumer price inflation, % y-o-y, eop||0.5||0.2||1.0||1.9||2.2|
|Exchange rate GBP/USD, eop||0.64||0.68||0.69||0.69||0.61|
|Budget balance, % of GDP||-5.1||-4.0e||-3.7||-2.6||-2.3|
|Current account balance, % of GDP||-5.1||-5.2||-4.7||-4.3||-3.9|
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