Growth forecast questioned

The Office for Budget Responsibility‘s (OBR) growth forecast has been questioned by the National Institute for Social and Economic Research (NIESR).

While stating the rate of growth this year will be 1.8 per cent, higher than originally forecast, the OBR trimmed the prediction for 2011 to 2.1 per cent from its previous 2.3 per cent, while tipping a 2.6 per cent rise in Gross Domestic Product in 2012.

However, even this figure is likely to be an overestimate due to the problems in the eurozone, the NIESR said.

It suggested the risk of a double-dip recession is still small – albeit at one in six rather than one in ten – but the growth rate will only be 1.7 per cent next year, rising to 1.9 per cent in 2012.

NIESR’s forecast saw incomes falling in real terms and spending consequently contributing less to economic growth.

The latter factor may offer a very good reason for people to look for debt consolidation measures, as these could help reduce outgoings to counterbalance the drop in financial means.

According to the OBR, inflation will stay above target next year at 2.8 per cent, although it will dip to 1.9 per cent in 2012.

Commenting on the forecast, chancellor George Osborne said its showed the country is starting to go through a period of economic rebalancing in which it moves “away from an economy built on debt” into one which makes and exports more.

He expressed optimism over the future of the economy as a result, saying there will be more jobs and growth in the longer run.