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UK: Fiscal ammunition to underpin economy – RBS

Economists at the Royal Bank of Scotland analyze the United Kingdom outlook once it is out of the European Union. EUR/GBP’s exchange rate is 0.832 right now. 

Key quotes

“The UK economy grew by 1.4% in 2019 – slightly better than the 1.3% in 2018 but still far from a stellar performance. It looks like the government is serious about using fiscal policy ammunition to support the economy.”

“Jonathan Haskel, a renowned academic and a member of the Monetary Policy Committee, recently spoke about the link between the intangible investment and monetary policy. Companies are investing more in intangibles and less in machines and equipment. But it is harder to borrow against the intangibles. If the conventional financial system finds it hard to lend against intangible assets, then the increasing role of intangibles in the economy will contribute to a lower long-run real interest rate. That is one reason to expect low-rate environment to persist.”

“The second estimate of euro area and the EU GDP growth in Q4 confirmed it increased a mere 0.1%. But in better news it was revealed that the number of employed persons increased by 0.3% in the euro area and by 0.2% in the EU during the same period, accelerating from a 0.1% in both areas in the previous period and beating market expectations of 0.1%. On an annualised basis employment went up by 1.0% in euro area and by 0.9% in the EU. This was the first release of GDP and employment numbers in which EU does not include the UK – many more changes to com

 

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