Global economy experiencing slow decline
The outlook for the global economy has improved in recent months. The likelihood of the UK leaving the EU without a deal is now significantly less, and the deadline for the Trump administration imposing import tariffs on European cars has now passed. Our forecasts for the international economy have therefore been revised up since the last time, but the international economic downturn is still expected to continue in the years ahead.
Fiscal policy still almost cyclically neutral
Fiscal policy has been approximately cyclically neutral in recent years. Although growth in public investment and consumption is expected to be somewhat below the trend growth, the ageing population will push up spending on retirement pensions and other benefits. The combination of cyclically neutral expenditure growth and small changes in the tax level means that the budgetary impulse is expected to remain almost constant throughout the projection period. The structural non-oil public deficit will be well below 3 per cent of the value of the oil fund by 2022.
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