Can the United Kingdom avoid a recession? The short answer is yes. At least it’s not expected to happen at the turn of the year.
The Brexit vote saw the economy fall at a record pace, but things have settled down now and economic activity has stabilized.
According to experts, the private sector from hospitality to manufacturing to construction have all experienced a big rebound. That being said, the uncertainty that continues to weigh on the minds of people will continue to impact investments and hiring decisions.
So Britain's economy has slowed down, but it didn’t get anywhere close to an expected recession.
The immediate reaction to the Brexit vote was fear and that stock market took a dive. But stock prices have since recovered. So economists now believe that the impact of Brexit will be somewhat modest compared to what was originally predicted.
The cheaper currency has also helped drive economic growth, so that should boost the country’s GDP. But business investment will still be low and the same can be said for consumer spending.
It’s a domino effect as businesses holding back on hiring long-term and make investments, consumers will also tighten their wallets.
But in the short-term, a weaker sterling pound will mitigate some of these negative effects by boosting exports.
Experts don’t believe that there will be a major impact on housing prices. They also don’t believe in a large drop in consumption. Further, analysts only predict limited spillovers to the Eurozone from Brexit.
So both the sterling pound and the euro are expected to maintain almost the same exact pace in the near future.
There’s also renewed optimism in China’s economy, so a rebound in commodities prices is expected as the global economy gets more stable. As a result, you can say that things look pretty good for the near future.
But although the UK economy will avoid recession and stabilize over the short-term, experts don’t expect a boom for the global economy. This is mainly due to a lack of fiscal buffers coupled with the limited scope of effective monetary accommodation.
In other words, the governments will have little room to spend more or borrow and central banks have already cut interest rates.
So as investments and global portfolios go, investors must practice caution. But for the time being, there is nothing to fear as a recession will be avoided in the near future.