The U.K. could be headed for a prolonged recession in 2018 if the Brexit vote continues its downward trend, economists say.
“There is no question that the economy will be in a recession,” said Paul Ashworth, chief economist at IHS Global Insight.
“IHS Global believes that the U.k. is set to have a recession in the fourth quarter of 2018,” Ashworth said.
Ashworth added that he believes the economy could suffer a recession during the next quarter of 2019.
Ashmore noted that the British economy has been shrinking since the financial crisis, but he noted that many of the factors contributing to the downturn are still present.
The U., he said, has had to borrow to invest and is expected to continue to do so.
The Bank of England has also indicated it expects the economy to grow by just 0.1% in the second quarter of 2020, the most pessimistic forecast of any major central bank.
Ashworth’s comments came after the U: “We believe that the recession could be as severe as the one in the United States,” said IHS economist Benjamin Tal, adding that “the economy is likely to be in deflationary territory.”
Ashmore noted the United Kingdom’s manufacturing sector, which is responsible for about 40% of the country’s GDP, has been contracting since the Brexit referendum, with a decline of about 40%.
Ashwins forecast for the U.-K.
trade deficit in 2019, which would be roughly 3% of gross domestic product, is down from a forecast of 6.2% in February 2018.
The country’s trade surplus with the U., which is about $3.5 billion, is also down from the 6.5% it had in February.
While the U.: Ashworth and Tal both expect that the trade deficit will be smaller in 2019 than in 2018, they both also say that there will be more imports coming in from China than coming out of the U, which Ashworth attributes to rising prices and rising taxes on Chinese goods.
In the meantime, Ashworth noted that exports to China will also increase.
“The trade deficit is now almost as big as the trade surplus,” Ashwins said.
“And that is going to be the most damaging for the economy in 2019.”
IHS forecasts a U.s. economic expansion of 1.8% in 2019 and 2.4% in 2020.