British economy prospects grim, says think-tank
The prospects for the British economy over the next six months are grim, and have worsened quickly this year, according to a report by a London economic think-tank.business Updated: Aug 04, 2012 13:53 IST
The prospects for the British economy over the next six months are grim, and have worsened quickly this year, according to a report by a London economic think-tank.
The National Institute for Economic and Social Research (NIESR) report predicted on Friday that the British economy, now in a double dip recession after three quarters of negative growth, will contract by 0.5% this year, reported Xinhua.
Simon Kirby, senior research officer at the NIESR, said that for 2012 Britain's GDP growth had been revised down from no growth to a contraction of 0.5 percent, and for 2013 from 2% growth to 1.3%.
"We have revised down our projection for GDP growth this year and next year. This is, relatively, due to domestic factors this year," he said.
"Import penetration was relatively higher than had been expected, perhaps indicating that those areas of the economy competing with imports have been less successful," Kirby added.
Growth would be weaker in 2013 because of weaker demand from the euro area, hitting projected GDP growth by a cumulative 0.5% in 2012-13.
The NIESR also forecast that unemployment will peak at 8.6% in 2013.
Its forecast also predicted that consumer price inflation would fall below its 2% target by the end of 2012, after a prolonged period of being significantly over target but following a falling trend.
British inflation was 2.4% in June, but had hit a peak of over 5% in late 2011.
Despite the uncertainties in the economic outlook and the poor performance of the economy over the past three quarters, NIESR economists expect the cyclically adjusted current government budget to be in surplus in 2016-17, which is consistent with government targeting.
Growth this year had been hit by the 'Jubilee effect' - the longer public holiday and disruption associated with the Queen's Diamond Jubilee celebrations in June - which had reduced estimated growth in the second quarter by 0.4% point, but with a corresponding boost to be expected in the third quarter.
However, the NIESR report said this implies that underlying growth is still negative.