The Bank of England today downgraded its forecast for UK GDP growth in 2019 from 1.7 per cent (a forecast it made in November) to 1.2 per cent. That is a chunky fall, but really, does anyone really care?
As I have pointed out here many times before, the Bank’s record for forecasting is pretty lousy. The past year has been no exception. What has caught my eye is just how over-optimistic it was about Euro area growth a year ago. In its inflation forecast in February 2018 the Bank foresaw GDP growth in the Eurozone over 2018 running at 0.75 per cent per quarter. In the event, growth slowed dramatically to 0.4 per cent in the first two quarters and to 0.2 per cent in the second two quarters.
The truth is, if we do end up with growth this year of 1.2 per cent, that will be quite a turn-up for the books compared with the prophecies Bank of England Governor Mark Carney made in the run-up to the 2016 referendum. A month before the referendum result, he suggested that the consequences of a vote for Brexit 'could include a technical recession'. We are still waiting for one. Indeed, here we are possibly seven weeks before a messy, no-deal Brexit, the government is in complete crisis – and still the economy is growing and unemployment is at its lowest since the early 1970s.
I am not pitching for Mark Carney’s job, nor claiming to be an effective soothsayer myself. I can’t honestly say that, in the aftermath of the referendum, I imagined that negotiations with the EU would turn out to be so utterly excruciating as they have been. I under-estimated both the obstinacy of the EU and the incompetence of Theresa May in overseeing these negotiations. But if you had told me two years ago, that seven weeks before our due departure date, we would still have no idea of our future relationship with the EU, and be nowhere near prepared enough for a no-deal Brexit, I would not have expected the economy still to be growing. Yet growing it is. It has proved remarkably resilient, no matter what has been thrown at it.
That, in a way, has been the tale of the past decade. We have had Euro crises, public spending cuts in many areas, combined with the Bank of England printing money. We have had shock election results, an unexpected referendum result, the most left-wing Labour leader ever getting frighteningly close to power. And yet the economy seems to potter along regardless at an unexciting, undulating growth rate of between 0.1 per cent and 0.6 per cent per quarter. It is somewhat sluggish compared with earlier eras – and yet we haven’t had a single quarter of negative growth since the fourth quarter of 2012.
Maybe we all judged Gordon Brown too soon – and that, from beyond the political grave, he has after all achieved what he promised to do: and finally abolished the cycle of boom and bust.