Economic Research published a new economic forecast for the years leading up to 2027 early in April. We expect to see restricted economic growth this year and in the next two years. According to our forecast, this growth will be broadly based, driven by increased private consumption and investment, but also growing export.
We published our forecast under a cloud of uncertainty, especially as regards trade restrictions and the global economic outlook. The president of the United States unveiled his extensive tariff plan at the beginning of the month only to delay major parts of it a few days later. In light of the high level of uncertainty and volatility in international trade, the International Monetary Fund (IMF) revised its economic forecasts downwards while revising inflation forecasts upwards for most western countries.
The inflation figure for April was rather disappointing, measuring 4.2%. This was rather higher than our forecast for 4.0% inflation. We forecast 3.9% inflation in May and June, and 3.7% inflation in July.
The Monetary Policy Committee of the CBI announces its next policy rate decision on 21 May. The policy rate is currently 7.75%. The real policy rate based on past inflation is 3.55%, unchanged from the last decision. Domestic consumption has continued to grow and real estate prices to rise. In addition, inflation expectations have not declined in the past few months. All things remaining equal, the likelihood of a policy rate cut in May is dwindling.
Turnover in the residential housing market has increased again from the first months of the year after having decreased slowly but surely from the middle of 2024. That being said, the Housing and Construction Authority (HMS) stated this month that sale of new apartments was slow. Despite slower price increases in the residential real estate markets, housing prices have increased more than general price levels. The real price of housing in March was 5.3% higher than the same time last year. We forecast moderate price increases in coming years, between 5-6.5% in nominal value per year.
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