PRIME (Policy Research in Macroeconomics) economists were asked by the FT “How fast do you think the UK economy will grow in 2018 and how will this compare to other countries?” (See here).
We replied as follows:
The end of 2017 witnessed, in our view, the top of the global asset bubble. Rupert Murdoch’s decision to dispose of 21st Century Fox was a clear indication that the bubble had peaked. Bitcoin’s stratospheric rise is just one of the many asset bubbles that may well implode in 2018. The decision by the ECB to begin ‘tapering’ and the global tightening triggered by the Fed, spells instability and volatility for the heavily indebted global economy. At the same time we are in a global cyclical upturn which is frothy. This means the UK may do a little better than many have forecast, but still below most G7 countries, due mainly to uncertainty surrounding Brexit. We think UK GDP may rise in 2018 by around 1.7 — 1.8 per cent, (as against OBR’s 1.4 per cent) but compared to over 2 per cent for the US and Eurozone. Our ‘prediction’ could be downwardly affected (a) by a renewed Brexit crisis, or (b) if the peaking of the bubble, and global tightening means the global upturn fizzles out even earlier than we expect.