NIESR: economy set for post-Brexit improvement

2 Aug 17

The UK economy will grow by 1.9% in 2018 after a Brexit-related slowdown, the National Institute of Economic and Social Research has predicted.

In a report out today, the economic forecaster predicts this year’s growth will drop to 1.7%, down from 1.8% in 2016 due to the inflationary effects of Brexit.

Meanwhile the world economy is expected grow by 3.6% this year and the next, up from 3.1% in 2016.

Public sector net borrowing in the UK will hit £61.6bn this year, up from £55.2bn last year but is expected to drop to £40.8bn in 2018 according to the NIESR economists.

NIESR also predicts that inflation will peak at 3% in the last quarter of this year before easing back to the Bank of England’s target rate of 2% in the final quarter of 2019.

The institute assumes a hike interest rates by the Bank of England in the first quarter of 2018, bringing this forward from its initial estimate in the second quarter of 2019.

Its report states: “The economy has slowed each year since 2014 and according to our forecast, 2017 will mark the trough for GDP growth. Thereafter, we envisage a modest recovery that takes economic growth to a level that is close to potential.”

Speaking about the possible interest rate hike, researchers said: “This will be the first policy rate increase in nearly eleven years. This rate increase should not be seen as a tightening in policy, but instead as a modest withdrawal of some of the additional stimulus that was injected into the economy after the 2016 EU referendum.”

The institute noted that its forecasts are conditioned on a return to meaningful productivity growth from 2018 onwards, concluding that if such growth fails to materialise it would present a downside risk to their calculations.

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