The British Chambers of Commerce just cut its economic growth forecast for the UK economy in what it called a “wake up” call to policy makers.
The BCC said in a statement that it downgraded Britain’s economic growth predictions:
- 2016 — From 2.5% to 2.2%.
- 2017 — From 2.5% to 2.3%.
It also included a three year forecast — for the first time ever — with a 2.4% GDP growth prediction for 2018.
The BCC says that the cut in Britain’s economic growth over the next year reflects that of the wider slowdown in the global economy.
“Weaker growth than previously expected in most UK sectors reflects a general global slowdown, which is due to lower productivity, adverse demographic trends and geo-political uncertainties. The worse net UK trade position that we are now predicting is mostly due to weaker global growth, but we do need to do more to boost exports,” said David Kern, Chief Economist at the BCC in the statement.
“Worsening global trends will present the main dangers for the UK economy over the next few years. Given the unacceptable size of the current account deficit, failure to achieve a meaningful improvement in net exports will make the UK vulnerable to speculative attacks, and our credit rating could be at risk.”
Dr Adam Marshall, Acting Director General of the British Chambers of Commerce also added: “Our forecast should stand as a wake-up call. The UK’s economic performance is reasonably good when measured against our main competitors, but it’s only mediocre when compared against long-term trends.
“Our trade deficit remains too high, and is not forecast to improve substantially over the next three years. In turbulent times, a consistent focus on improving infrastructure, sweeping away barriers to business investment, and supporting exporters would be a real recipe for success.”
The economic growth cut comes soon after the Bank for International Settlements (BIS) — known as the central banks’ central bank — warned that there’s a “gathering storm” in the global economy, which is in part caused by governments around the world running out of monetary policy options.
In two separate notes, published March 6, BIS economists highlighted the fragile global economic backdrop and said negative interest rates could become a reality for many more countries as central banks search for ways to stoke real growth and battle issues like tumbling oil prices hitting the economy.
“The tension between the markets’ tranquility and the underlying economic vulnerabilities had to be resolved at some point,” said BIS chief Claudio Borio. “In the recent quarter, we may have been witnessing the beginning of its resolution.”
“We may not be seeing isolated bolts from the blue, but the signs of a gathering storm that has been building for a long time.”