Our UK exports forecast is based on assumptions about demand growth in the markets into which the UK exports and the share of the demand that UK exporters will secure. So to estimate the direct impact of global economic conditions on UK exports, we need a forecast for UK export markets, which is related to world trade and to world GDP growth. We start by forecasting world GDP growth, which informs prospects for world trade growth, which in turn allows us to forecast UK export markets growth.
As well as this direct effect, global financial market conditions can affect the UK economy indirectly, for example through broad confidence channels. To some extent, these effects are factored in via ‘conditioning assumptions’ for financial market variables. If we judged them to be sufficiently material, we could also make other adjustments to our forecast to reflect expected effects that might not be captured by those conditioning assumptions.