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UK Stands Out On Deficit Outlook (And So Will U-Turn)


As UK Chancellor Hunt prepares to speak on the government's fiscal plans (1100UK), the chart below provides some comparative perspective on the deterioration of the UK's near-term fiscal outlook in the past few weeks.

  • Forecasts for 2023 European fiscal balances deteriorated markedly after the Russia-Ukraine war began in February, primarily due to energy subsidies and weaker growth. The UK's fiscal outlook looked less negative than the Eurozone aggregate, with Germany's expected deficit gradually "catching down" with the UK's.
  • But since September's mini-budget, the UK's 2023 expected deficit has more than doubled from around 3% of GDP to well above 6%. Italy's is 5% by comparison.
  • These forecasts haven't yet caught up with the last week's events. Though the UK's red line is set to "u-turn" over the coming weeks as analysts' surveys adjust, the question is, by how much.

Source: BBG Survey, MNI

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