The recovery will be weaker than expected as Britain struggles out of recession, George Osborne admitted yesterday.
The Office for Budget Responsibility – the Treasury watchdog set up by the Chancellor – said the economy will grow by only 1.7 per cent this year.
That is less than the 2.1 per cent expected in November and 2.3 per cent predicted at the Emergency Budget last June.
Mr Osborne also warned that inflation will remain worryingly high for the rest of this year and unemployment will keep rising until the summer.
The Chancellor said the recovery will be 'more challenging' than after the recessions of the 1980s and 1990s.
'That is inevitable when we've had the sharpest fall in output since the 1930s, the highest budget deficit in peacetime, and the largest banking crisis in our entire history.'
Mr Osborne said inflation will remain between 4 per cent and 5 per cent for most of this year before dropping to 2.5 per cent next year and back to the 2 per cent target in 2013.
High levels of inflation will prolong the misery for families already being punished by subdued wage growth and the fastest rise in living costs for two decades.
Average earnings are expected to rise by a mere 2 per cent this year and 2.2 per cent in 2012, according to the OBR.
Stubbornly high levels of inflation could force the Bank of England to raise interest rates sooner rather than later in a further blow to struggling households.
The Budget prediction is that unemployment will rise from the current rate of 8 per cent, or 2.53 million, to a peak of 8.3 per cent in the second quarter of the year.
Some 400,000 public-sector workers are expected to lose their jobs by 2015 – more than the 330,000 slated for the chop last November.
But that will be more than offset by the creation of 1.3 million jobs in the private sector, according to the OBR, as unemployment falls to 6.4 per cent in 2015.
The OBR predicted growth of 0.8 per cent in the current first quarter of 2011 following the 0.6 per cent slump at the end of last year.
The forecast effectively ruled out the possibility of a double-dip recession, and the OBR said slow growth this year 'creates scope for slightly stronger growth in later years'.
It forecast gross domestic product to increase by 2.5 per cent in 2012 and 2.9 per cent in 2013 and 2014.
'We expect this recovery to be weaker than the recoveries of the 1980s and 1990s, with growth remaining below 3 per cent in every year,' it said.
The OBR blamed the Chancellor's harsh austerity measures, a shortage of bank lending, and high levels of debt among businesses and households.
Economists said the growth forecasts for 2012 onwards looked optimistic given the headwinds buffeting Britain such as high inflation and political turmoil in the Middle East.
Source: www.dailymail.co.uk
The Office for Budget Responsibility – the Treasury watchdog set up by the Chancellor – said the economy will grow by only 1.7 per cent this year.
That is less than the 2.1 per cent expected in November and 2.3 per cent predicted at the Emergency Budget last June.
Mr Osborne also warned that inflation will remain worryingly high for the rest of this year and unemployment will keep rising until the summer.
The Chancellor said the recovery will be 'more challenging' than after the recessions of the 1980s and 1990s.
'That is inevitable when we've had the sharpest fall in output since the 1930s, the highest budget deficit in peacetime, and the largest banking crisis in our entire history.'
Mr Osborne said inflation will remain between 4 per cent and 5 per cent for most of this year before dropping to 2.5 per cent next year and back to the 2 per cent target in 2013.
High levels of inflation will prolong the misery for families already being punished by subdued wage growth and the fastest rise in living costs for two decades.
Average earnings are expected to rise by a mere 2 per cent this year and 2.2 per cent in 2012, according to the OBR.
Stubbornly high levels of inflation could force the Bank of England to raise interest rates sooner rather than later in a further blow to struggling households.
The Budget prediction is that unemployment will rise from the current rate of 8 per cent, or 2.53 million, to a peak of 8.3 per cent in the second quarter of the year.
Some 400,000 public-sector workers are expected to lose their jobs by 2015 – more than the 330,000 slated for the chop last November.
But that will be more than offset by the creation of 1.3 million jobs in the private sector, according to the OBR, as unemployment falls to 6.4 per cent in 2015.
The OBR predicted growth of 0.8 per cent in the current first quarter of 2011 following the 0.6 per cent slump at the end of last year.
The forecast effectively ruled out the possibility of a double-dip recession, and the OBR said slow growth this year 'creates scope for slightly stronger growth in later years'.
It forecast gross domestic product to increase by 2.5 per cent in 2012 and 2.9 per cent in 2013 and 2014.
'We expect this recovery to be weaker than the recoveries of the 1980s and 1990s, with growth remaining below 3 per cent in every year,' it said.
The OBR blamed the Chancellor's harsh austerity measures, a shortage of bank lending, and high levels of debt among businesses and households.
Economists said the growth forecasts for 2012 onwards looked optimistic given the headwinds buffeting Britain such as high inflation and political turmoil in the Middle East.
Source: www.dailymail.co.uk
No comments:
Post a Comment