The British Chambers of Commerce (BCC) has published its latest Economic Forecast. The forecast reduces expectations for UK GDP growth in 2011 from 2.2% to 1.9%, but raises its prediction for 2012 growth from 1.8% to 2.1%.
The downward revision to the 2011 growth forecast reflects the BCC’s assessment that the negative impact of the Government’s austerity plan will initially be more serious than previously envisaged; mainly due to lower house prices and other signs of fragility in the household sector. The worsening Eurozone debt crisis will also dampen UK growth prospects next year more than formerly expected.
The economy’s longer-term prospects are now more positive, because there is more evidence that rebalancing towards the private sector is taking place.
Other key features are:
- BCC now predicts a smaller net increase in UK unemployment than in the September forecast. It believes total unemployment will rise from 2.45m (7.7% of the workforce) in July-September 2010, to 2.6m (8.0%) in the first half of 2012.
- The forecast envisages Public Sector Net Borrowing falling to £148.0bn (10.0% of GDP) in 2010-11, £120.1bn (7.8%) in 2011-12, and £93.0bn (5.8%) in 2012-13.
- CPI inflation is expected to remain above 3% until the final months of 2011, but is likely to fall back to below the 2% target early in 2012.
- It assumes that the Bank of England Monetary Policy Committee (MPC) will keep the Bank Rate at its current 0.5% level at least until Q3 2011. BCC also expects the MPC to increase the Quantitative Easing programme from £200bn to £250bn before the middle of next year.
Full details of the forecast are available here.
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