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IIn economics, like most of life, everything is relative. latest IMF forecast For global economy – as well as for British prospects Specifically – of the “glass half full” variety.
In global terms, the situation over the next few years will not be as bad as the International Monetary Fund thought in its spring forecast, or in its summer update. This is mainly because Donald Trump’s new tariffs Neither have been as expected, nor have they given rise to a much more powerful global wave of protectionism.
Therefore, the net effect on trade has been to divert imports and exports to conform to the pattern of tariffs. in the form of exports of manufactured goods China While there have been declines in the United States, there have been increases in China and the rest of the world. The global economy has proven more “resilient” than anticipated.
Thus, global growth this year will be higher next year than previously expected – but much less impressive than in past decades, or it would have been absent in the absence of President Trump’s historically high and sometimes erratic taxes on imports. The uncertainty that US tariffs have created has stagnated – but, as recently renewed trade hostility towards china Shows that the path to the future is still in limbo.
The slowdown in trade between the world’s two largest economies has hurt them and the entire world. When Mr. Trump claims, as he often does, that the United States is the “hottest economy” in the world, his audience should know that the data suggest otherwise, and that under his “sleepy” predecessor, Joe Biden, it was even hotter.
For an open economy like the UK, the slowdown in world trade and the continuing deleterious effects of Brexit are deteriorating living standards. Politicians, at least when in power, naturally tend to have “glass half full” personalities, so Chancellor Rachel Reeves has latched onto this Very slight increase in growth forecast Ignored downgrades for 2025 (from 1.2 per cent to 1.3 per cent) and 2026.
But now she can no longer hope that Britain will be proud of it Fastest growth in G7 By the end of this Parliament; Now, it will most likely face inflation. This means that the Bank of England will remain extremely cautious about reducing interest rates, mortgage bills and the cost of working capital for businesses. In other words, the cost of living crisis looks like it will drag on for much longer.
food prices This is a particular concern for the poorest families. The “misery index” – an informal measure used by economists that links inflation to the unemployment rate – seems to be ticking higher too, as recent jobs data confirms.
And then there’s the budget, along with tax increases Universally expected next month. If anything, the metaphorical glass will appear apparently empty by the time Christmas arrives.
The political consequences of this gloomy scenario are quite clear. It is unlikely that things will improve enough by next spring for Labor to avoid another round of disastrous election results. Sir Keir Starmer can no longer expect Labor to regain control of Scotland, retain Wales and make further progress on local councils as it could at the time of the general election last year. Instead, it looks like another retreat, and more questions about the party leadership – even though there is no evidence of that. Prime Minister’s rival There are plenty of viable options to offer.
In such circumstances, Sir Keir and Ms Reeves will have to make the case for what the Government is doing and why. This failure to create a “narrative” is, in fact, the most serious error the government has made since coming to power – from which all the other mistakes have arisen. Is there now no understanding of economic strategyWhere individual policy choices on taxation, public expenditure, social security, investment, planning and trade can be set in context.
The Prime Minister is said to be keen to remind the public that Britain’s current economic problems have been exacerbated by Brexit, a failed project jointly owned by the Conservatives (currently led by a staunch Brexiteer) and Reform UK, which actually advocates “more Brexit”. It’s all well and good to shift the blame, but what is the Prime Minister’s answer when a frustrated public asks him what he is going to do about Brexit, beyond a limited renegotiation of the EU trade deal?
Labour’s campaign song in the 1997 election was “Things Can Only Get Better”. The country has a right to know when and how this will happen – or should the glass remain half empty?