–CBI Cuts 2011 GDP Forecast To 1.7% Vs Feb Forecast Of 1.8%
–CBI Cuts 2012 GDP Forecast To 2.2% Vs Feb Forecast Of 2.3%
LONDON (MNI) – The Confederation of British Industry said that the
economy will continue to grow this year, albeit at a sluggish pace. The
CBI has cut its GDP forecasts for 2011 to 1.7% from 1.8% in its February
This 1.7% rate matches the Office of Budget Responsibility’s
estimate. The National Institute of Economic and Social Responsibility
quotes 1.4% as its expected GDP growth rate for 2011, versus its
forecast of 1.5% in January.
The CBI pointed to a slew of “headwinds” responsible for this
modest growth rate: lower household income; public spending cuts; poor
wage growth and inflation. The report also said that recent volatility
in commodity prices, fueled by global socio-political unrest, had its
part to play.
The CBI also expects net trade to be stronger – export growth is
forecast to rise to 8.6% this year and 7.6% in 2012. This growth is
predicted to outpace that of imports – estimated to grow at 6.1% this
year and reduce to 4.6% next year. The CBI says that the resulting
growth of net exports will contribute a great deal to GDP growth.
John Cridland, Director-General of the CBI, added that there are
“some brighter spots on 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
He also cautioned that the “rebalancing of the economy is going to
take time to feed through, and domestically it may not feel like much of
a recovery for some time yet.”
In a press conference, Ian McCafferty, the CBI’s Chief Economic
Adviser, added that Q4 growth was weaker than anticipated. He said that
the disruptions caused by bad weather over the winter and spring were
factored into considerations, as was the rise in VAT in the spring.
In its report, the CBI also downgraded its growth forecast for 2012
to 2.2%, down from the 2.3% seen back in February. This compares to
OBR’s forecasts of 2.5%, which was also lowered from the 2.6% predicted
in November 2010. The OBR also cited weaker commodity prices and
inflation as factors in its calculations.
Commenting on the planned slashing of public spending, Cridland
said that the CBI fully supports Chancellor George Osborne in his plans
to cut spending rather than increase taxation.
–London bureau: 44 20 7862 7491; email: email@example.com