Brexit uncertainty trims UK growth forecast
The British think tank has lowered its main economic growth forecast for the UK in 2019 from 1.9 percent of its last forecast in November to 1.5 percent in its latest quarterly review.
"Since our last forecast, Brexit uncertainty has intensified and global growth has slowed," said Amit Kara, head of UK macroeconomic research at NIESR, at a press conference here on Tuesday, "UK economic growth has slowed in response, but not collapsed."
The main forecast was conditional on a soft Brexit scenario, which Kara said was the most likely one for the near term, provided a deal is struck.
Kara said that the main driving force of growth was likely to be domestic demand and consumer spending more specifically, while investment spending was likely to continue to fall due to Brexit-related uncertainty.
"We now expect the next 25 basis point bank rate increase to be delayed until August this year," said Kara.
NIESR also presented a no-deal Brexit scenario in the review.
"There is a chance that the UK exits the EU without a deal at the end of March," said Kara. "Policymakers will respond to that scenario by activating contingency plans and inject stimulus into the economy if possible."
He said that if the inflation expectations and wages remain anchored, there would be more room for the policymakers.
NIESR has also revised downward its outlook for global growth in 2019 from 3.8 percent to 3.6 percent, and said that the global growth cycle had probably peaked. ■