The U.K.’s economic future is looking brighter.
The Bank of England upgraded its growth expectations for 2017 on Thursday, offering a much rosier view of Britain’s economic prospects than the doom and gloom forecasts it produced in the wake of the Brexit vote.
The central bank now expects growth to hold steady at 2% this year, the same rate of expansion posted in 2016. It represents a major upgrade from the bank’s August estimate of 0.8% growth and the 1.4% forecast it made in November.
The Bank of England said its outlook had improved because of the effects of the stimulus package it launched after U.K. voters chose in June to leave the European Union.
A steadying global economy, rallying stock markets, robust consumer demand and “supportive credit conditions” have also helped.
“Domestic demand has been stronger than expected over the past few months, and there have been relatively few signs of the slowdown in consumer spending that the [central bank] had anticipated following the referendum,” it said in a statement.
However, the central bank warned that consumer spending could soon falter.
A sharp drop in the value of the pound following the referendum is translating to higher prices for imported goods, such as food and electronics. Expectations for sluggish pay growth will also hurt household spending power over the next few years.
For now, consumers are saving less and borrowing more to finance their lifestyles.
Bank of England data show household saving rates are down to levels last seen during the global financial crisis. People are using their credit cards to fund purchases and taking out more car loans.
Despite these potentially worrying signs, Bank of England Governor Mark Carney said the U.K. is not experiencing “a debt-fueled consumer expansion.”
The central bank expects economic growth to slow in 2018 to 1.6% before improving to 1.7% the following year.