According to economists at credit-ratings agency Moody’s, the UK economy will slow down but should not go “anywhere close” to a recession.
It argues that the Stock Market has now “stabilised” following the result of the EU referendum in June and that the impact of the vote will be “relatively modest”. It also expects the lower pound to support economic growth of 1.5% this year and 1.2% in 2017.
Senior Moody’s analyst Madhavi Bokil said: “Uncertainty around the future of the economy outside the common market will continue to dampen business investment and consumer spending, as businesses hold back on hiring and making long-term investments, and as consumers postpone large spending decisions.
“However, the fall in sterling will mitigate some of the negative effect in the short term by providing a boost to exports. Our baseline growth forecasts also incorporate the assumption that some fiscal loosening and monetary policy accommodation will support the economy, with the euro-zone limiting the slowdown in growth.”
Meanwhile, Moody’s says it is more optimistic about the future of the Chinese economy than it has been for several months. As a result, it has increased its GDP forecasts for China to 6.6% growth this year and 6.3% in 2017.
However, Ms Bokil said her organisation does not forecast “a boom for the global economy” any time soon: “There is a “nexus of low trade growth, low investment and slow productivity gains, which will dampen potential growth rates globally.”