CBI cuts UK’s 2011 GDP growth forecast to 2%

22 September 2010 11:13  [Source: ICIS news]

LONDON (ICIS)--The Confederation of British Industry (CBI), which lists among its members most major chemical companies in the UK, on Wednesday reduced its forecast for UK economic growth in 2011 to 2.0% from its previous estimate of 2.5%.

The CBI said the pace of recovery was likely to be more sluggish in 2011 than previously forecast, following measures announced in the country's emergency budget to deal with its deficit. Consumer spending is forecast to drop next year following January’s VAT rise and modest wage increases.

However, the CBI expected the UK economy to continue to grow in 2010 at a slightly faster pace of 1.6%, compared with the previously forecast 1.3%, reflecting better-than-expected growth in the second quarter this year as companies began rebuilding their stocks.

The CBI added that a double dip back into recession was unlikely.

“The degree of uncertainty around the outlook remains high, but our view is that the UK’s tentative recovery will be sustained, albeit with weaker levels of growth,” said Richard Lambert, CBI director-general.

Ian McCafferty, CBI chief economic adviser, said: “While the outlook for growth in 2010 has been lifted slightly, due to slightly faster economic activity in the second quarter of the year, the outlook for next year will be more restrained.

“The action to get the public finances back onto a sustainable footing will no doubt temper the recovery going into 2011,” he added.

UK exports were expected to grow by 3.5% in 2010 and 6.4% in 2011, with net trade expected to make a positive contribution to GDP growth rates throughout the forecast period, the CBI said.

In addition, the CBI said the Bank of England was likely to start raising interest rates later than previously expected and that monetary stimulus would gradually be withdrawn.

 ($1 = €0.75)

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By: Franco Capaldo
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