NIESR lowers UK GDP growth forecast ahead of elections
The UK’s economy will grow more slowly than previously anticipated this year, although the deceleration seen in the pace of the expansion during the first three months of the year will likely prove temporary, a prestigious think-tank said.
Overnight, the National Institute for Social and Economic Research (NIESR) lowered its projection for the rate of growth in Britain’s gross domestic product (GDP) this year to 2.4% from the 2.9% estimated in February.
“Future productivity growth remains the largest single uncertainty facing the UK economy,” the think-tank explained.
Assuming the government sticks to the fiscal plan as set out in Budget 2015 – although any future government will likely pursue a looser stance – Britain’s economy will grow by 2.5% this year and 2.4% next, the NIESR said in a statement.
The economists expect Bank Rate will be hiked for the first time in the present monetary cycle come the first quarter of 2016 - as temporary oil price and exchange rate effects dissipate - and will increase by roughly 50 basis points per year thereafter, reaching 3% by 2020.
Export performance should overcome short-term weakness and provide support to GDP growth in the medium-term.