New forecasts for UK & global growth

The National Institute of Economic and Social Research has published new forecasts for the UK and global economies, suggesting that GDP in Britain will grow by 0.7% in 2013.

After zero growth last year, they are forecasting modest growth this year followed by economic growth of 1.5% in 2014.

They have also made predictions for price inflation, with the Consumer Prices Index (CPI) measure of inflation forecast to average 2.4% this year and 2.3% next year – both remaining above the government inflation target of 2%.

According to these forecasts, it will take until 2015 for the size of the British economy to return to its 2008 pre-recession peak.

On a real per capita basis, GDP will not return to its previous largest size until 2018.

The NIESR points to worryingly persistent poor productivity performance in contrast to the positive developments of rising employment and falling unemployment rates.

Suggesting some solutions, the NIESR says: “Recovery depends upon a resumption of consumer spending, while balanced recovery also requires the resumption of corporate spending and a pick-up in export growth.”

They support “a new and credible fiscal framework” to “underpin a continued commitment to fiscal consolidation over the medium to long term”.

Looking further afield at prospects for global economic growth, the NIESR believes world growth will remain below trend at 3.3% in 2013 and 3.7% in 2014, which is little unchanged from their previous forecast.

Whilst the world economy remains weak, with very high unemployment rates in developed economies and continued below trend growth overall, there are some signs of improvement, along with significant downside risks.

They point to easing tensions on global financial markets, particularly in Europe, in recent months.

These latest economic forecasts might not make particularly cheerful reading, but they are certainly less gloomy than they have been in recent years.

The UK and global economies appear to be on a recovery track; still a little shaky and with risks of derailment, but growing nevertheless.

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