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Instant View: Sunak says UK borrowing to soar

11/25/2020 | 12:07pm

LONDON (Reuters) - Britain will spend 280 billion pounds ($374 billion) this year to help its economy weather the COVID-19 pandemic, finance minister Rishi Sunak said, while government borrowing will hit a peacetime record of nearly 400 billion pounds.

COMMENTS:

SARAH HEWIN, CHIEF EUROPE ECONOMIST AT STANDARD CHARTERED:

"It's interesting that the OBR (Office for Budget Responsibility) for next year are looking for a rebound but not as strong as the BoE (Bank of England) was flagging just a few weeks ago. The forecast reflects the ongoing impact of COVID this year and that it will linger into the early months of next year before we see the vaccine response coming through.

"Sterling rates have barely blinked. The market is taking news of higher debt levels -- not just in the UK but everywhere -- in its stride because the main thing is to support the economy through this damaging period. The view is it's important to minimise the impact of COVID and that stronger growth is the way to tackle large fiscal deficits."

DAVID OWEN, CHIEF FINANCIAL ECONOMIST AT JEFFERIES IN LONDON:

"We're just going through the numbers, on the face of it they are not surprising -- the downside risks depend on the path of the virus.

"The GDP forecast for this year is consistent with the drop forecast in the fourth quarter. On the debt projections, these sort of debt levels that are being forecast are not as scary as some were pointing to."

MELISSA DAVIES, CHIEF ECONOMIST AT REDBURN:

"Further support for public sector wages would have been welcome and a useful tool to stimulate domestic demand at a time when the private sector is struggling, but the statement struck an ambitious tone on supporting a nationwide recovery.

"The announcement of an Infrastructure Bank has shades of Labour's old policy proposals and fits with the current mood of leveraging low interest rates and, at least indirectly, QE (quantitative easing) to fund public investment. With government borrowing continuing to rise, the door is wide open for the Bank of England to continue increasing QE in the coming years.

"Less positively, GDP forecasts look ambitious -- with rates of 5-6% pencilled in for 2021 and 2022. These look hopelessly optimistic, not least as the economy adjusts to its new relationship with the EU."

($1 = 0.7495 pounds)

(Compiled by the Global Finance & Markets Breaking News team)

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