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Brexit deal and demographics drag on long‐term outlook
Publication year - 2020
Publication title -
economic outlook
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.1
H-Index - 8
eISSN - 1468-0319
pISSN - 0140-489X
DOI - 10.1111/1468-0319.12461
Subject(s) - brexit , economics , population ageing , demographics , population growth , workforce , population , demographic economics , projections of population growth , government (linguistics) , immigration , term (time) , development economics , international economics , economic growth , european union , geography , demography , physics , quantum mechanics , sociology , linguistics , philosophy , archaeology
▀ We have revised down our long‐term forecast for GDP growth based largely on our expectation that the UK is headed for a much looser relationship with the EU. This will result in damage to trade and lower FDI inflows. ▀ We now expect potential output growth to slow to 1.4% a year from 2020–2030 down from 1.6% a year from 2010–2020. In the two decades after 2030 we expect the drag from Brexit‐related effects to fade, but weaker contributions in labour supply and human capital will cut output growth to 1.2% a year. ▀ Demographics have been a key contributor to potential output growth over the past 30 years. But an ageing population and a more restrictive immigration regime are likely to mean the workforce grows far more slowly in the future. ▀ Our long‐term growth forecast is weaker than the OBR's and implies that future governments will face a combination of disappointing growth in tax revenues and increasing demands for government spending from an ageing population.