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United Kingdom Country Risk Report 20 2018

United Kingdom Country Risk Report 20 2018

The hung parliament and Conservative minority government has simultaneously reduced the likelihood of a 'hard' Brexit and increased the likelihood of a 'disorderly' Brexit, in which the UK crashes out of the EU with no transition arrangement and falls back on WTO rules.

In the absence of a Conservative majority, the risk of parliament fail-ing to approve the final deal agreed between the British government and the EU rises.

Preliminary post-Brexit data have proven resilient and the economy will benefit from an uptick in global trade in 2017. The economy still faces massive headwinds from weak investment and productivity growth, and falling real income growth.

While Brexit poses clear downside risks for growth, particularly in the short run, we also see potential upsides over the long term.

However, it remains unclear what terms will define the UK's post-Brexit relationship with the EU, and thus how the referendum result will impact the potential growth of the economy.

The Bank of England (BoE) will keep its policy rate on hold at 0.50% through 2018. With inflation above target, the risk of additional tightening is non-negligible.

The government's fiscal austerity programme has reached the twilight hour. The ruling Conservative party's diminished parlia-mentary position, widely felt austerity fatigue, and likelihood that the economy will run out of steam, suggest increased fiscal support over the medium term.


Executive Summary
Core Views
Major Forecast Changes
Key Risks
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Global Recovery Offers UK Respite
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Outlook On External Position
TABLE: CAPITAL AND FINANCIAL ACCOUNT BALANCE
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
TABLE: EXPORTS
TABLE: IMPORTS
Monetary Policy
BoE: Focus Will Shift To Wages
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Structural Fiscal Position
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
Currency Forecast
Upward Revision For GBP
TABLE: CURRENCY FORECAST
Chapter 2: 10-Year Forecast
The UK Economy To 2027
Brexit Not Necessarily A Drag On Long-Term Trend Growth
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 3: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
Subtle Shifts In Political Risk
Chapter 4: Operational Risk
Developed States
TABLE: LABOUR MARKET RISK INDEX
TABLE: LOGISTICS RISK INDEX
TABLE: CRIME AND SECURITY RISK INDEX
TABLE: TRADE AND INVESTMENT RISK INDEX
Chapter 5: BMI Global Macro Outlook
Trade Tensions Take Centre Stage
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
TABLE: UNITED KINGDOM – MACROECONOMIC DATA & FORECASTS

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