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UK economic growth tipped to be slowest in Europe next year UK economic growth tipped to be slowest in Europe next year
(35 minutes later)
The UK will sink to the bottom of the European economic growth league next year to join Italy as the slowest-growing economy in the EU, before falling further the year after to anchor the table alone, according to European commission forecasts.The UK will sink to the bottom of the European economic growth league next year to join Italy as the slowest-growing economy in the EU, before falling further the year after to anchor the table alone, according to European commission forecasts.
The EU’s gloomy predictions are based on a soft Brexit – meaning Britain is expected to lag behind all its EU peers even if Theresa May can reach a deal with Brussels before 29 March.The EU’s gloomy predictions are based on a soft Brexit – meaning Britain is expected to lag behind all its EU peers even if Theresa May can reach a deal with Brussels before 29 March.
The commission forecast that consumer spending growth will remain weak, continuing a subpar performance since the EU referendum in June 2016. It said business investment would stay subdued, while external demand for UK goods will dwindle. The commission predicted the result would be GDP growth of 1.2% in 2019 and 2020. The commission forecasts that consumer spending growth will remain weak, continuing a subpar performance since the EU referendum in June 2016. It said business investment would stay subdued, while external demand for UK goods will dwindle. The commission predicted the result would be GDP growth of 1.2% in 2019 and 2020.
It came as the International Monetary Fund sounded the alarm over the mounting risks to the European economy from a no-deal Brexit, the escalation of trade disputes around the world and high levels of Italian government debt.It came as the International Monetary Fund sounded the alarm over the mounting risks to the European economy from a no-deal Brexit, the escalation of trade disputes around the world and high levels of Italian government debt.
In the IMF’s latest health check on the region, it also warned the European economy was running into turbulence, with negative consequences for growth in coming years.In the IMF’s latest health check on the region, it also warned the European economy was running into turbulence, with negative consequences for growth in coming years.
The Washington-based fund said all likely Brexit outcomes would have a negative cost for the economy, although it warned a no-deal scenario would have the biggest downsides.The Washington-based fund said all likely Brexit outcomes would have a negative cost for the economy, although it warned a no-deal scenario would have the biggest downsides.
“No-deal Brexit would lead to high trade and non-trade barriers between the UK and the rest of the EU, with negative consequences for growth,” it said.“No-deal Brexit would lead to high trade and non-trade barriers between the UK and the rest of the EU, with negative consequences for growth,” it said.
The IMF also issued a sharp warning to the populist Italian government to urgently tackle its high levels of government borrowing, before time runs out as the European economy heads for greater turbulence. The IMF also issued a sharp warning to the populist Italian government to tackle its high levels of government borrowing before time runs out, as the European economy heads for greater turbulence.
In a rebuke to the Italian government, which is currently locked in a bitter standoff with the commission over its budget plans for next year, the IMF regional director for Europe, Poul Thomsen, said Italy needed to urgently rebuild strength in its public finances.In a rebuke to the Italian government, which is currently locked in a bitter standoff with the commission over its budget plans for next year, the IMF regional director for Europe, Poul Thomsen, said Italy needed to urgently rebuild strength in its public finances.
“We basically agree with the commission’s assessment [on Italy’s budget],” he said, while warning that the country needed to act fast to tackle its debt pile before the economic weather changes. “We basically agree with the commission’s assessment [on Italy’s budget],” he said, while warning that the country needed to act fast to tackle its debt pile before the economic weather changed.
The commission has demanded Italy resubmit its tax and spending plans ahead of a deadline next week, because it argues the proposals break commission rules over government borrowing. The Italian government has so far refused to change course, insisting it will not “kneel” before the EU.The commission has demanded Italy resubmit its tax and spending plans ahead of a deadline next week, because it argues the proposals break commission rules over government borrowing. The Italian government has so far refused to change course, insisting it will not “kneel” before the EU.
Although Italy’s tax and spending plans may help stimulate its economy, Thomsen said they could have the opposite effect, given that Italy has the second-highest national debt in Europe, after Greece, of more than 130% of GDP.Although Italy’s tax and spending plans may help stimulate its economy, Thomsen said they could have the opposite effect, given that Italy has the second-highest national debt in Europe, after Greece, of more than 130% of GDP.
“[Growth is] not going to come from fiscal stimulus,” Thomsen said. “Italy does not have space for [raising spending]. You could see a situation where expansion of fiscal policy had a negative impact on growth … the cost to Italian borrowing will go up and you actually end up slowing the economy.”“[Growth is] not going to come from fiscal stimulus,” Thomsen said. “Italy does not have space for [raising spending]. You could see a situation where expansion of fiscal policy had a negative impact on growth … the cost to Italian borrowing will go up and you actually end up slowing the economy.”
Economic growth (GDP)Economic growth (GDP)
European commissionEuropean commission
European UnionEuropean Union
International Monetary Fund (IMF)International Monetary Fund (IMF)
ItalyItaly
EconomicsEconomics
EuropeEurope
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