BCC upgrades UK short-term economic prospects
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The British Chambers of Commerce (BCC) has published its latest Economic Forecast and raises its expectations for UK GDP growth to 1.7 per cent for this year, and to 2.2 per cent for 2011.
Despite the more positive short-term view, the business group also predicts that the pace of growth will slow sharply over the medium-term as the coalition government's tough deficit-reduction measures kick in.
BCC is now forecasting GDP growth of 1.7 per cent in 2010, 2.2 per cent in 2011 and 1.8 per cent in 2012. In June, growth of 1.3 per cent in 2010 and 2.0 per cent in 2011 was predicted. The coalition's austerity programme and the worsening global background are likely to dampen Britain's medium-term prospects.
This forecast envisages unemployment rising over the next 18 months from 2.46 million to a peak of 2.65 million (8.3 per cent of the workforce) in the first half of 2012.
With tax receipts showing surprising buoyancy in recent months, the BCC expect the deficit to fall faster than planned. It predicts large declines in public sector net borrowing (PSNB), to £144 billion (9.7 per cent of GDP) in 2010-11, £110 billion in 2011-12, and £83 billion (5.1 per cent of GDP) in 2012-2013.
CPI inflation will remain above the 2 per cent target until the end of 2011, but it is likely to fall below 3 per cent over the next year. In annual average terms the BCC forecast CPI inflation at 3.2 per cent in 2010, 2.7 per cent in 2011 and 1.7 per cent in 2012. RPI inflation is forecast to average 4.7 per cent in 2010, 4.1 per cent in 2011 and 2.8 per cent in 2012.
The Monetary Policy Committee is expected to hold interest rates at 0.5 per cent until the second quarter of 2011. By the end of 2011, the bank rate is predicted to hit 1.75 per cent.
