LONDON (MNI) – The British Chambers of Commerce has joined the
flood of forecasters lowering their UK growth projections, cutting its
forecast for growth this year to 1.1% from a previous estimate of 1.3%.
In its latest set of economic forecasts, the BCC also cuts its
forecast for 2012 growth to 2.1% from a previous 2.2% estimate but says
that it expects prospects for growth to improve in coming years and
predicts that 2013 growth will exceed next year’s.
The BCC’s prediction for 2011 UK growth is below the average 1.3%
in the Treasury’s latest survey of independent forecasters. The Bank of
England’s Monetary Policy Committee is more optimistic, with an implied
1.7% 2011 growth forecast in its August Inflation Report
The BCC says that a new recession will be avoided despite ongoing
fiscal austerity and the turndown in global growth prospects, although
it says that these factors will likely weigh on activity in the
future.
The BCC said ‘special factors’ such as adverse weather effects and
the extended holidays around the Royal Wedding weekend had dragged
on growth in Q2 and weighed on its forecasts.
Unemployment forecasts have been increased – the BCC predicts that
it will rise to 8.2% of the workforce in Q4 2012 (2.6 million), from
7.9% of the workforce (approximately 2.5 million) in April-June this
year.
The BCC said that the “key reason for predicting a higher peak in
unemployment is slower growth, reinforced by the harsher impact of the
fiscal austerity plan.”
Lower growth in the UK and globally mean interest rates will be
kept low for longer than previously thought, the BCC says. It predicts
interest rates in the UK will begin rising in August 2012 and reach
1% in Q4 2012 and then 2.25% by Q4 2013.
If the economy continues to look weak, the BCC expects the MPC will
look to relaunch quantitative easing, increasing its stock of asset
purchases from the present stg200 billion to stg250bn.
The BCC concludes that many UK growth forecasts have “overstated
the ability of the economy to grow relatively rapidly in the recovery”.
“This excessive optimism is one of the reasons for the current
gloom,” the BCC adds.
–London newsroom: 00 44 20 7862 7492; email: sanjukta.moorthy@ntkn.com
[TOPICS: MABDS$,M$B$$$]
