UK economy outlook forecast 2012 -2013 ; The Confederation of British Industry (UK's economic outlook) has released its economic forecast for the British economy for the next two years.
Their report states that they expect the UK economy to grow, but only slowly. The report says that despite pressure on household incomes and public spending cuts the UK economy should still grow by 1.7 per cent this year and a further 2.2 per cent in 2012.
The growth estimates have been revised slightly downwards from previous expectations of growth in 2011 of 1.8 per cent and 2012 of 2.3 per cent.
The CBI expects exports to make a strong contribution to the UK economy both this year and next. Export growth is expected to come in at 8.6 per cent in 2011 and 7.6 per cent in 2012 and to outpace the rise in imports over the same period.
Business investment is also expected to contribute to growth with growth of 8.8 per cent predicted for 2011 and 8.7 per cent in 2012.
John Cridland, CBI Director-General, said:
"Although there are a number of risks to the UK's economic outlook, we continue to expect that the recovery will make further headway this year and next, but the pace will be sluggish.
"But there are some brighter spots in the forecast. Global economic conditions remain upbeat, and we expect to see a stronger performance by UK exporters. Business investment will also make a firm contribution to growth in 2011 and 2012.”
UK GDP growth has remained static in the final quarter of 2010, contracting by 0.5 per cent and the first quarter of 2011, growing by 0.5 per cent and the CBI expects growth to continue at a modest rate of 0.6 per cent over the next three quarters.
The effect of higher commodity prices is expected to cause inflation to continue to rise this year but as the effect of the VAT increase dissipates, inflation should fall in 2012.
The CBI expects the Bank of England’s Monetary Policy Committee (MPC) to raise interest rates slowly from the third quarter of 2011 through 2012 and they expect base rate to reach 2.5 per cent by the fourth quarter of 2012.
Ian McCafferty, CBI Chief Economic Adviser, said:
"The recovery continues to be choppy and lacking in vigour. Expansion in certain sectors is being offset by weaker performance in others. What remains striking is how little we expect the pace of growth to accelerate in 2012, and that it will be far less robust than we'd normally expect in the second and third years of a recovery.
Meanwhile, unemployment is expected to peak at 2.62 million at the end of this year before falling slightly to 2.52 million towards the end of 2012.
Wage growth is expected to grow at a slow rate over the next two years and household spending is predicted to show just a rise of 0.2 per cent in 2011 and 1.1 per cent in 2012.
The CBI expects the coalition government’s efforts to reduce the UK deficit to have some success as public sector net borrowing should fall to £122.9 billion in 2011/12 and down to £105 billion in 2012/13.
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