The balance of payments report is a periodically released indicator by the British Office for National Statistics at the end of each quarter, and it measures the changes in the cross-border transactions between the UK and other countries. In the last released report, which covered the underlying changes in the current account for the period October-December 2018, it was noted that:
“The UK current account deficit widened by £0.7 billion to £23.7 billion in Quarter 4 (Oct to Dec) 2018, or 4.4% of gross domestic product (GDP) […] Annually, the UK current account deficit widened to 3.9% of GDP in 2018, compared with 3.3% in 2017.” [source]
Generally, the balance of payments report provides a complete bundle of critical economic data, which covers various aspects regarding the functionality of the British economy for the period in question, however, the current account statistics provide invaluable information about the pace of economic expansion in the UK.
If Friday’s report demonstrates that the present trend of continually widening current account deficit has been preserved for Q1 of 2019 as well, then investors would become alarmed following the increased chances of a recession in Britain. Such detrimental possibilities arise at times when the widening of the current account deficit is outpacing the rate of economic growth.
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The report is going to cover the changes in the current account spanning from January to March 2019. In the same period, the GDP growth rate dropped from 0.7 to 0.2, which means that if the initial forecasts are realised and the current account deficit widens from -23.7 billion to -32.0 billion, investors’ fears would be justified.
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Overall, Friday’s report is going to demonstrate the resilience of the Brittish economy and also, how prepared it is to face the upcoming official separation from the European Union. Moreover, if the deficit widens, the GBP can be anticipated to be pressured by intensified speculative trading.
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