Silvia Ardagna, Head of European Economics Research, shares key insights from Barclays' latest Global Outlook publication.
We think the credibility test for the UK Government lies on its ability convince the market that the public debt-to-GDP ratio will be on a downward trajectory. 2023 will likely see an increase in the deficit as a result of the energy measures announced in Q3. We also expect some tax changes in the Autumn Statement, with some reductions in spending. Discretionary fiscal tightening is likely to keep the public debt on a downward trajectory.
According to the media, the package will be around £55bn, made up of spending cuts and tax changes/increases. We should not expect by default that these austerity measures are going to have a detrimental impact on the economy. We expect the BOE to hike by 50bps in December 22, and then further hikes may be likely in Q1 23 due to the inflation outlook. The statement will play an important part in moderating further hikes required by the Bank of England in H1 2023.
The level of inflation remains high, but when assessing the numbers on a month-on-month basis, rather than year-on-year, the trends indicate a downward trajectory, suggesting a peak in Q4 22.
Output growth for Q3 was negative, and we expect it to be the case for Q4, which indicates the UK is in a recession. An increase in unemployment isn’t expected, compared to previous inflationary scenarios.
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About the expert
Managing Director and Head of European Economics Research
Silvia Ardagna is a Managing Director and Head of European Economics Research. Based in London, Silvia leads the team covering the Euro area countries and some of the small open European economies. Silvia joined Barclays in 2021 from Goldman Sachs, where she was a managing director in the Investment Strategy Group in the Consumer and Investment Management Division and in Global Investment Research from 2012 to 2021. Prior to joining the private sector, Silvia was an associate professor at the Department of Economics of Harvard University from 2004 to 2010. She has been visiting fellow at the European Central Bank and The International Monetary Fund and she is a leading expert in the area of fiscal policy. Her academic research has been published in top refereed journals and has been influential in shaping the policy debate around fiscal issues. Silvia earned a BA and MA in Economics from Bocconi University and a PhD from Boston College. She is married and has two sons.