LONDON, Jan 26 (Reuters) - Bank of England Governor Mark Carney said on Tuesday that Britain’s large current account deficit remains a risk for the economy because investors might worry about the possibility of the country leaving the European Union.
While the shortfall had narrowed a bit, it could be made worse by a weakening global economy and if investors demand greater returns to hold British assets, Carney said when asked by a lawmaker about Britain’s planned EU membership referendum.
“The global general environment has become much more febrile, much more volatile, and relying on the kindness of strangers is not optimal in that kind of environment, and that’s what is the case when you’re running a 4, 4-1/2 percent (of GDP) current account deficit,” Carney told lawmakers.
“And secondly, the possibility of a risk premia being attached to UK assets, because of certain developments, exists and that plays into the riskiness of the situation.”
The BoE has previously said it will watch carefully for signs that Britain might find it harder to cover its balance of payments shortfall due to concerns about the referendum. (Reporting David Milliken and Huw Jones; writing by Ana Nicolaci da Costa; editing by William Schomberg)