Chance UK growth below two per cent in 2019 rise
11 February 2019
- Growth forecast between one and three per cent in both 2019 and 2020
- Nearly 80 per cent chance growth will be below two per cent in 2019
- One in four chance inflation exceeds three per cent in 2020
- One in 10 chance that the economy will contract during 2020
The WBS Forecasting System has revised down its forecasts of economic growth, but remains more optimistic than the Bank of England, IMF, and the OECD.
It believes there is a 60 per cent chance that GDP growth exceeds the Bank of England's more pessimistic forecast, centred at 1.2 per cent.
Looking ahead to 2020 there is more uncertainty about the range of possible outcomes for economic growth. The WBS Forecasting System (WBSFS) predicts there to be a one-in-four chance that growth disappoints and turns out less than one per cent. But at the same time, there is a two-in-five chance that growth exceeds two per cent in 2020.
The most likely outcome is inflation between one and three per cent in both 2019 and 2020. But the WBSFS indicates that the chances of inflation breaching the Bank of England’s target more than double to around two-in-five in 2020.
Inflation risks are also on the upside: the WBSFS forecasts a one-in-four chance that inflation exceeds three per cent in 2020 relative to close to a one-in-10 chance that inflation falls below one per cent.
Commenting on the latest WBSFS forecasts, timed to coincide with publication of the latest GDP data from the ONS, Professor Ana Galvao, of the Macroeconomic Policy and Forecasting Network at WBS, said: “Conditioning on the ONS’ latest GDP growth estimates for 2018Q4, the WBSFS has revised down its forecasts for economic growth in 2019.
"It now predicts nearly a four-in-five chance that growth is less than two per cent in 2019, up from a one-in-two chance one quarter ago.”
Professor James Mitchell, of the Macroeconomic Policy and Forecasting Network at WBS, added: “Despite these downward revisions and now a one-in-10 chance that the economy contracts in 2020, the WBSFS is more optimistic about economic growth in 2019 and 2020 than the Bank of England, IMF and the OECD. It forecasts a three-in-five chance that growth in 2019 will exceed the Bank of England’s latest forecasts centered at 1.2 per cent.”
Professor Anthony Garratt, of the Macroeconomic Policy and Forecasting Network at WBS, said “While the most likely outcome in both 2019 and 2020 is that inflation remains around two per cent, there are elevated upside risks. There is around a one-in-four chance that inflation exceeds three per cent in 2019 rising from just a one-in-10 chance in 2019.”