UK: We no longer expect a recession - Danske

Analysts from Danske Bank no longer expect a recession in the United Kingdom. In July, after the Brexit referendum, they saw a contraction in economic activity but since then better-than-expected economic data led them to change its outlook.

Key Quotes:

“As the economic data have been better than expected, we now expect quarterly GDP growth to stay positive during H2 16, i.e. we no longer expect a Brexit recession.”

“We have lifted our GDP forecasts to 1.8% this year and 0.7% next year (previously 1.1% and -0.4%, respectively). We stress that uncertainty surrounding our forecasts is higher than usual as the Brexit withdrawal negotiations are set to begin early next year.”

“The main growth driver continues to be private consumption. We still believe investments will decline in the short-term as firms adjust to Brexit. Although the UK may avoid a Brexit recession in the short-term, we expect quarterly GDP growth to stay moderate next year around 0.2% q/q as investments will stay weak during the negotiations. It is still difficult to estimate the long-term consequences of Brexit as we do not know how the negotiations will turn out.”