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Imports should also be slightly more dynamic, fuelled by the upturn in demand (2.5% after 2.4%). However, given the very gradual nature of moves to rebuild inventories and the ongoing adjustment in investment levels, import growth should stay below trend.
Continue to reduce public deficits, in order to meet EU commitments and gradually reduce the public debt ratio. This is very high, at 92.2% of GDP in 2013, and is likely to come out even higher in 2014, at 95.3% and at 97.2% in 2015 (official forecasts). It should only start to fall from 2017. The debt ratio should begin to ease from 2017, thanks to a further reduction in the deficit and slightly more sustained growth.
As depicted by a recent comparative study performed by PEW Research, the French are the more pessimistic on the economic outlook of their country than the Italians and are at the same level as the Greeks. By contrast, the British are among the most optimistic, despite the fact that their public finances are drifting worse than that of the French, but in a very different context, with 3% GDP growth and low unemployment.
Unsurprisingly, a region-by-region analysis shows that the greatest deterioration in the ratio of house prices to income is to be found in London and the South East, which are also the regions that have seen the biggest rise in house prices.
With the economic growth supporting the demand, rents should keep on increasing. However, London should now slow down, as it has already experienced much of this growth phase, whereas the rest of the UK is lagging behind. On the corresponding real estate clock, London is approaching the top of the cycle, whereas the rest of the UK is getting out of the bottom.
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