12 Feb 2015
Policy tightening might restrict actions of UK’s new government – BNPP
FXStreet (Barcelona) - Catherine Stephan of BNP Paribas, comments on the challenges to be faced by the new government in the UK post the elections, noting that high debt servicing charges and policy tightening might restrict its actions in the future.
Key Quotes
“..the next government will have to pursue the fiscal consolidation efforts undertaken to reduce the budget deficit and public debt (87.9% of GDP in 2013-14).”
“Public debt is unlikely to decline before 2017-18 according to the coalition government’s plan presented last December, and will drop to 83% of GDP in 2019-20.”
“Despite the UK’s buoyant growth prospects (we estimate GDP growth at 2.5% in 2015 and 1.7% in 2016), the debt burden restricts the government’s actions, and leaves little manoeuvring room to deal with any future shocks. It could become even more restrictive as monetary policy tightens and debt servicing charges begin to rise.”
“Despite the sharp drop in inflation earlier this year, the Bank of England could still raise its key rate in early 2016 (from 0.5% at present).”
“Favourable growth prospects and the absorption of surplus production capacity should fuel stronger wage growth and price increases in the second half of 2015.”
Key Quotes
“..the next government will have to pursue the fiscal consolidation efforts undertaken to reduce the budget deficit and public debt (87.9% of GDP in 2013-14).”
“Public debt is unlikely to decline before 2017-18 according to the coalition government’s plan presented last December, and will drop to 83% of GDP in 2019-20.”
“Despite the UK’s buoyant growth prospects (we estimate GDP growth at 2.5% in 2015 and 1.7% in 2016), the debt burden restricts the government’s actions, and leaves little manoeuvring room to deal with any future shocks. It could become even more restrictive as monetary policy tightens and debt servicing charges begin to rise.”
“Despite the sharp drop in inflation earlier this year, the Bank of England could still raise its key rate in early 2016 (from 0.5% at present).”
“Favourable growth prospects and the absorption of surplus production capacity should fuel stronger wage growth and price increases in the second half of 2015.”