Economic growth to remain steady but subdued
Latest CBI forecast reveals soft domestic demand to weigh on economic activity
In the CBI’s latest economic forecast, economic growth is expected to remain subdued ahead – marking a continuation of the tepid momentum that we’ve seen over 2017 so far.
CBI expects GDP growth of 1.5% in both 2017 and 2018 (from 1.8% in 2016), broadly unchanged from its previous forecast. The key drivers of its growth outlook remain the same: household spending remains under pressure from squeezed real earnings; uncertainty over Brexit weighs on business investment; but net exports see more of a boost, aided by the lower pound and strong global growth.
CBI also expects similarly muted growth in 2019, 1.3%, on the assumption that agreement with the EU on a time-limited transition period is reached sometime in Q1 2018, and implemented upon the expiry of Article 50 in March 2019 – thus ensuring a relatively smooth transition to a new relationship with the EU. The main drivers of the forecast remain unchanged in 2019, with domestic demand staying soft but support from net trade continuing.
The downside risks to our forecast remain high, particularly in 2019, when a more disorderly outcome from EU negotiations could have a more adverse impact on economic activity and financial markets.
For more information contact Alpesh.Paleja@cbi.org.uk