Boris Johnson’s departure announcement: Good news for the British economy?

Far from deteriorating the balance due to another political crisis in Westminster, the British currency moved up 0.63% to $1.2002 around 10:50 GMT. Against the euro, it also peaked in a month at 84.96 pence. The London Stock Exchange followed the same trend on Thursday, while the FTSE 100, its main index, was up 1.27% at 7,197.92 points shortly after 10:50 GMT.

As resignations continue to mount in his government, Boris Johnson will address the nation and, according to the BBC, should tender his resignation as leader of the Conservative Party.

In the past, the blows of British leaders would have weighed heavily on the pound, but this time, “The mostly positive response suggests that the markets are relieved to see the situation move quickly rather than witness political instability.“, commented Citi Index analyst Fawad Razakzada.

Boris Johnson voluntarily quitting his post”Avoids the possibility of an involuntary, long and painful departure“,” says Matthew Ryan, analyst at Abery.

However, the outlook for the pound, which hit its lowest level since 2020 against the dollar on Wednesday, doesn’t leave analysts particularly upbeat. ,There are many issues on the agenda of the next prime minister.“, notes Hargreaves Lansdowne analyst Susannah Streeter, who discusses the crisis in the cost of living and talks over the Northern Irish post-Brexit agreement with the European Union.

Since the Brexit vote in June 2016, the pound has remained down 20% against the dollar and 10% against the euro.

,a continuous trajectory,

Britain’s public debt, which has increased with pandemic-related spending, is “on an unstable trajectory“Without tax hikes or spending cuts, warned public budget forecasting body OBR on Thursday. What has been seen in the past two decades”A financial crisis, a health crisis and a global energy crisis triggered by Russia’s invasion of Ukraine“, which weighs in on public finance, lists the OBR (Office for Budget Responsibility) in a report.

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In the midst of a political crisis that could see Prime Minister Boris Johnson tender his resignation as leader of the Conservative Party on Thursday,”It all adds up to a difficult prospect for this government and the next.“, in a press release called this institution in charge of budget forecasting for the executive.

According to the latest official figures, the public debt reached 95.8% of GDP last May, its highest level since 1963 at 2,363.2 billion pounds. Public borrowing fell less rapidly than expected, punished by inflation that increased interest on debt.

,Our long-term projections suggest that debt will exceed 100% of GDP“Within 30 years will reach even more”267% of GDP in 50 years“Given the current trajectory, the OBR predicts that. And it could be much higher if geopolitical tensions continue to rise or if energy prices continue to rise.

Among other factors weighing on public finances, the OBR cites “Uncertainty created by Britain’s decision to leave the EU“And, for decades to come,”Perhaps the greater economic and financial challenges of tackling climate change and the costs of aging” Population.

To reduce debt to 75% of GDP, the level it was before the impact of the pandemic,”It would take a tax increase of 1.5% of GDP at the beginning of each decade, a spending cut, or a combination of both, for the next 50 years.“The OBR is estimated, corresponding to £37 billion per year in the current context.

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