Faster economic growth forecast for 2019
09 November 2018
- Strong economic growth in late 2018 expected to continue
- WBSFS finds GDP could rise by more than two per cent
- Growth likely to exceed "pessimistic" Bank of England prediction
- Risk that inflation will exceed three percent in 2019
The Warwick Business School Forecasting System calculates GDP will continue to grow during 2019 after the latest Office for National Statistics (ONS) estimate confirmed 'strong economic growth' in the latter half of 2018.
The ONS first estimate of GDP revealed a 0.6 per cent growth for the third quarter of 2018. This means GDP has risen by 1.5 per cent during the last four quarters.
Using this estimate, the WBS Forecasting System (WBSFS) expects economic growth to continue through 2019. It predicts a nearly one-in-two chance the economy will grow more than two per cent, while there is little more than a one-in-ten chance of 'slow' growth of less than one per cent.
This estimate exceeds the more pessimistic predictions made by the Bank of England and the International Monetary Fund (IMF).
Inflation is likely to remain between two per cent and three per cent in 2019, but there is a one-in-four chance it will exceed three per cent, compared to less than a one-in-twenty chance that inflation falls below one per cent.
Professor Ana Galvao, of the Macroeconomic Policy and Forecasting Network at WBS, said: “Conditioning on the ONS’s latest GDP growth estimates for 2018Q3, the WBS forecasting system expects to see this recent growth continue through 2019.
"There is nearly a one-in-two chance of growth greater than 2% in 2019, and only a little more than a one-in-ten chance of ‘slow’ growth of less than 1%.”
Professor James Mitchell, of the Macroeconomic Policy and Forecasting Network at WBS, added: “The Bank of England, IMF and the HMT Panel of Independent Forecasters are all more pessimistic than the WBS Forecasting System about GDP growth prospects in 2019.
"While uncertainties remain, our forecast is that it is more likely than not that GDP growth in 2019 exceeds the central expectations of the Bank of England, the IMF and the HMT Panel of Independent Forecasters.”
Professor Anthony Garratt, of the Macroeconomic Policy and Forecasting Network at WBS, said “While the most likely outcome in 2019 is inflation remains between 2% and 3%, there are elevated upside risks. There is around a one-in-four chance that inflation exceeds 3% in 2019 and less than a one-in-twenty chance that inflation falls below 1%.”