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How to shockproof the UK economy’s exposure to global risks | Mohamed El-Erian
- UK economy faced market volatility in recent times due to a sharp rise in US bond yields induced by increased economic growth, inflation, and sensitivity to bond issuance coupled with deficits and debt.
- The rise in borrowing costs and currency depreciation pose challenges, hamper government's ability to mount fiscal- and monetary-policy responses.
- The British economy is still beset by long-term structural weaknesses despite Keir Starmer’s government's attempt to improve productivity, foster investment and promote faster growth.
- Strengthening trade linkages with US and Europe is recommended as political and geopolitical realities suggest that European ties could serve UK better than China ties.
- To improve the public’s understanding of UK's economic outlook, government must communicate to the public what it is already doing and expand on its effort to transform the economic outlook.
- Implementing wide range of measures and policies such as extended housing and planning, more comprehensive infrastructure, research, innovation, and trade skill development can make a difference but there is no magical bullet to transform UK's economic outlook.
- The UK needs to take broad-based policy action as it's exposed to external shocks making it vulnerable to global risks.
- Messaging must be consistent with timely and broad-based policy action to pull UK back from the brink of a self-reinforcing vicious cycle of rising borrowing costs, currency depreciation, intensifying inflationary pressures, and slowing growth.
- To dislodge the perception of UK as a mire of sluggish growth, anaemic productivity and investment, deteriorating public services and high deficits, policy action must be taken, and measures must be implemented timely.
- Despite the market turbulence, the British government has proven to be resilient, but repercussions from global shocks can still impact the economy.
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