Notizie economiche
09.07.2024

Stronger UK GDP growth will help stabilize government debt - S&P Global

Credit rating agency S&P Global said that in order to stabilize Britain's growing public debt, the new government will need to take measures that will accelerate economic growth. 

Last week, Keir Starmer led Labor to a landslide election victory, and became the first leader from the center-left party to win a U.K. national election since Tony Blair. The Labour Party won more than 400 of the 650 seats in the House of Commons – but now comes the hard part. The party faces the mammoth task of restoring chronically underfunded public services in a time of economic hardship.

S&P Global said that given expectations for the UK's debt-to-GDP ratio to rise to 100% next year, the new government is likely to remain committed to strengthening public finances in order to gradually reduce this ratio.

The UK economy showed solid growth during the first quarter, as GDP grew by 0.7% compared to the previous quarter, while GDP grew by 0.4% month-on-month in March. Accordingly, despite the fact that GDP did not change in April compared to March, it still indicated the continuation of significant momentum in the second quarter. The consensus forecast assumes that GDP grew by 0.2% month-on-month in May, which, if implemented, will lead to GDP growth of 0.5% in April-May compared with the average for the 1st quarter. This will indicate that the economy is on track for another solid quarterly growth in the 2nd quarter. A similar trend is observed in the service sector, where activity increased by 0.5% month-on-month in March and by another 0.2% in April. According to the consensus forecast, activity in the service sector increased by 0.2% in May. This will lead to the fact that the level of activity in the service sector for the period from April to May will grow by 0.7% compared to the average for the 1st quarter, which will again lead to steady quarterly growth in the second quarter. The main obstacle is industrial production, which fell 0.9% in April, and even after such a significant drop, it is expected to grow by only 0.2% in May. However, more encouraging signs from the services sector and overall GDP mean that the UK economy is on track to grow by 0.8% in 2024 after expanding by just 0.1% in 2023.

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