Global, UK economic growth slowing: Bank of England


Since the Bank of England’s (BoE) July Financial Stability Report (FSR) was released, the outlook for growth and unemployment in the United Kingdom and globally has deteriorated further. Prices have continued to rise rapidly, in considerable part reflecting steep increases in energy and food prices. UK household and business finances are under growing pressure.

In response to these price rises, central banks around the world, including BoE, have been increasing interest rates. These rate rises, and the expectation that they will rise further, have caused the cost of borrowing to rise for households and businesses, the bank said in its Financial Stability Report for December 2022.

Since the Bank of England’s July Financial Stability Report (FSR) was released, the outlook for growth and unemployment in the United Kingdom and globally has deteriorated further. Prices have continued to rise rapidly, in considerable part reflecting steep increases in energy and food prices. UK household and business finances are under growing pressure.

There have been large and rapid moves in financial market asset prices. The price of certain assets, such as risky corporate bonds, have fallen. These trends are due to a combination of the worsening global economic outlook and the potential for further adverse geopolitical developments, including from Russia’s invasion of Ukraine. This has increased uncertainty, the report said.

Globally, the challenging economic outlook is making it harder for households, businesses and governments to service their debt, it noted.

UK businesses have seen their earnings rise and debt fall as the effects of the COVID-19 pandemic have receded. But higher costs, lower demand, rising interest rates and continued disruption to supply chains are putting pressures on earnings for some businesses. Those most affected may find it harder to repay debts, the report said.

However, the UK banking sector is resilient to an economic downturn much worse than the one currently expected. That reflects the large financial buffers they have built up since the 2008 global financial crisis.

Sharp increases in prices, including of energy, tighter financial conditions and the worsening outlook for growth and unemployment will continue to weigh on debt affordability for households, businesses and governments globally. The bank’s financial policy committee judges that the risks of global debt vulnerabilities crystallising have increased.

Fibre2Fashion News Desk (DS)




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