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U.K. To Become the World's Fifth-Largest Economy, Overtaking France

The Center for Economic and Business Research predicts that the U.K. may overtake France to become the fifth largest economy in the world after its long time economic rival, France. 

U.K. To Become the World's Fifth-Largest Economy, Overtaking France

At the end of 2014, the U.K’s GDP rose to $2.828 trillion compared to $2.827 trillion in France. Although the gap between the two economies is small, it is still a significant one for the U.K. Figures published by the Center for Economic and Business Research (CEBR) show that the bump in UK figures can be attributed to prostitution and drugs.

The International Monetary Fund forecasts that the U.K.’s GDP will remain lower than France’s until 2017, with a forecasted $2.706 trillion in 2015 compared to France’s 2.885 trillion.

In 2015, the European Commission has forecasted that the U.K.’s economy will grow two times faster than other economies in the Euro region at a rate of 2.7 percent. Falling unemployment rates in the U.K. and a decline in output in France and Germany also play a role in the difference in economic performance between these countries.

At the same time, China’s GDP is set to overtake that of the U.S. by 2025 according to data by the CEBR. Predictions by the IMF also supported the forecasts with data showing that China’s economy overtook the U.S. on the basis of purchasing power parity in 2014.

CEBR further projects that for the first time since 1954, the UK will overtake Germany’s economy by 2030 due to a weakening euro and a declining population in Germany.

Jitters in the emerging markets have not deterred these economies from growing. Brazil and India are set to go grow their output to catch up with the economic performance of the developed world. By 2018, India is expected to have a similar GDP as U.K.’s present domestic output, with Japan predicted to take over as the world’s third largest economy by 2025. These figures are a clear indication of the major transformations taking place in the global economic landscape.

Market impact of UK’s GDP Projections


·        Among other economic factors, the GDP performance has a significant impact on the currency value of the sterling pound.  It is important for traders to take into consideration the three types of GDP when trading any currency pairs. These include the Final GDP, Preliminary and Revised GDP. The final UK GDP issued in the last quarter of 2014 is a better indicator of the strength of the sterling.

·        It is expected that a robust US economic recovery and steady output in the UK will see the GBP/USD to remain stable. In particular, retail sales in the UK have been laudably strong, further helping to cushion the Sterling against other major currencies.

·        Although the UK economy expanded by 0.7 percent in this last quarter, business investments declined by an equal 0.7 percent in spite expectations that business investments would grow by 2.3 percent each quarter in the past year. This decline in business investments could potentially weigh down the sterling if the trend continues into 2015.

 

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