‘We saw a sharper-than-expected narrowing in the current account deficit which may have helped to ease the margins for the concerns over the potential downside risks for the pound going forward during the upcoming Brexit negotiations.’ – Lee Hardman, MUFG
Data released on Friday showed that the UK’s current account deficit hit a five-year record low, which surprised many experts. In the Q4 of 2016, the current account advanced from -25.7 billion pounds to -12.1 billion pounds. The country’s trade balance with the rest of the world improved dramatically. Thus, in the Q4 of 2016, total trade deficit fell from 14.8 billion pounds to 4.8 billion pounds, due to the notable increase in goods export. In addition, there was also a less significant narrowing in the deficit on primary and secondary income accounts. According to the data, the deficits on secondary income and primary income fell from 4.3 billion pounds to 1.0 billion pounds amid a surge in direct investment. Overall, the UK’s current account amounted for 2.4% of GDP, which by itself grew at the pace of 0.7%. This data marked the 16th consecutive quarterly increase and secured country’s steady growth. A GDP rise in the last quarter reflects strong consumer spending and satisfactory results in the consumer-related industries. However, experts also recorded a 0.9% decline in business investment that is associated with the Brexit deal uncertainties. Finally, on a year-to-year basis, the UK’s GDP lost 0.4%, which was also attributable to the country’s decision to leave the EU.