We were asked by the Financial Times to contribute our views on a range of issues which have the potential to affect the UK economy during 2018. On overall growth, we said the economy will slow in 2018 as the uncertainty created by the stop-start Brexit negotiations nags at consumer and business confidence and at investment intentions. A drop to 1.5% from 1.8% in 2017 seems likely. The interesting comparison is with the eurozone, which could post growth as high as 2.4 per cent. Those data will be confirmed in spring just as the UK will leave the EU — a timely reminder of the damage that the UK is doing to itself by leaving.
On Brexit we said that it will either be possible to stay within a/the single market and a/the customs union or even that opposition to Brexit itself is starting to grow. Either there are now hopes that the UK will get as bad a deal as feared a year earlier.
On the consumer economy, we said the downward pressure on consumer spending that has so far come from a fall in real wages is likely to continue. Our other concern is the mountain of debt that consumers are building up and whether any of the bubbles in personal loans, credit card debt, and car loans will burst.
A year ago we contributed to the 2017 survey in which we said we predicted that growth would slow sharply, that inflation would rise and the negative impact from Brexit had been postponed rather than cancelled.
Our analysis of the opportunities that the opening up of the Iranian economy offers to British firms was featured in the second issue of the new monthly magazine Raconteur. It focused on a country of 80 million people — a majority of whom are under 30 and highly educated — which has the second-largest gas reserves and fourth-largest oil reserves in the world. It looked at the sectors that offered the best opportunities but also examined the potential financial and legal obstacles. The article can be found here.
We worked with LatinFinance, the magazine that covers Latin American economies and financial markets, on its Finance Ministry Scorecard. This is an annual assessment of the performance of the finance ministers and their ministries over the latest calendar year.
It recognises outperformance in managing fiscal and external accounts, building sustainable economic growth, and contributing to controlled inflation. It takes into account ministries’ transparency and clarity in communications with markets, independence and financial strength. The final decision is based on a series of in-depth interviews with market participants including ratings agencies analysts, private-sector agencies analysts and independent economists.
Our assessment led LatinFinance to decide that Colombia and finance minister Mauricio Cardenas had performed better than any major economy over that period. The announcement is here. Colombia was the fastest-growing large economy in Latin America and the Caribbean in 2014. It kept its fiscal deficit limited, and attracted strong levels of foreign investment. Further, the country has a low debt ratio, at below 32% of GDP. WE carried out an interview with Minister Cardenas in which he talked about how he had achieved strong growth in the face of the fall in the oil price and signs of weakness in the eurozone and Chinese economies. The article is here.
The drop in the price of crude oil from around $115 a barrel to as low as $44 a barrel has had a major impact on Latin America, where many countries are dependent on “black gold” for import and tax revenues.
We were asked by LatinFinance, the magazine that covers the region, to look at how the impact of cheaper oil had impacted the main economies and what the effect might be of a return to previous three-digit prices.
In this article we contributed the results of interviews with leading private sector and multilateral institutional economists as well as comments by the Colombian finance minister Mauricio Cardenas. We saw howe the region was divided into winners and losers and how economists believed the region would cope wth low oil – but benefits is prices rebounded. The full article is here (login).
We were asked by the Financial Times to provide out answers to a number of key questions facing the UK economy in 2015. As in the past few years the FT was looking for subjective opinions and views rather than point forecasts.
The overarching article, which featured a poll of several leading economists and financial analysts, found that most expected the UK recovery to strengthen this year. Of 90 economists surveyed, 77 thought that decent expansion rates would endure another year with only 10 expecting a slowdown to a “disappointing pace of growth”.
Our comments on the main issues on economic growth can be found at the bottom of the article.