Britain hikes 2010 growth forecast, cuts job-loss estimate

29th November 2010, Comments 0 comments

Britain on Monday raised its 2010 growth forecast to 1.8 percent from 1.2 percent, citing a stronger-than-expected recovery, and slashed its estimate of job losses arising from spending cuts.

However, the Office for Budget Responsibility (OBR) also revealed that gross domestic product (GDP) would grow more slowly than expected in 2011 and 2012, as the sweeping austerity measures begin to bite.

The report was published before a key economic statement from Finance Minister George Osborne, who will address parliament at 1530 GMT, one day after helping European counterparts thrash out an 85-billion-euro bailout for debt-stricken Ireland.

The OBR said it now expects around 330,000 jobs will be shed in Britain's public sector over the next four years as a result of the coalition government's deep spending cuts.

That compared with the prior estimate of 490,000 job losses that was given at the time of the government's deficit-slashing emergency budget in June, presented shortly after it took office.

"The UK economy has recovered more strongly since the spring than ... expected at the time of the June budget," the fiscal watchdog said in a 152-page report outlining its latest official predictions.

"GDP growth was greater than expected in both the second and third quarters, while employment has risen (and unemployment has fallen) to levels that the June forecast did not expect until the middle of 2012.

"The world economy has also grown more strongly than expected," said the OBR, which was created earlier this year to produce forecasts on behalf of the coalition Conservative-Liberal Democrat government.

British GDP -- the total value of all the goods and services produced in the economy -- was expected to grow 2.1 percent next year and by 2.6 percent in 2012, according to the OBR.

The previous estimates were for faster expansion of 2.3 percent and 2.8 percent respectively.

Britain escaped from a record-length recession late last year after a fierce worldwide downturn that was sparked by the global financial crisis.

Last month, the coalition government unleashed the biggest public spending cuts for decades to curb a huge public deficit -- but sparked concern in some quarters that the nation could be pushed back into recession.

The OBR said Monday that it lowered its job-losses forecast after the government revised its initial plans for even deeper cuts in public spending.

"With the government deciding in the spending review to reduce somewhat its planned cuts in public services spending, by announcing additional cuts in welfare spending, we expect general government employment to fall by 330,000 over the next four years, compared to the 490,000 predicted ... in June."

Recent official data showed that the economy grew by a robust 0.8 percent in the third quarter after a strong expansion of 1.2 percent in the second.

The upbeat GDP figures helped ease fears of the possibility of a double-dip recession.

"Our central forecast is that the economy will continue to recover from the recession but at a slower pace than in the recoveries of the 1970s, 1980s and 1990s," the OBR said.

"This relatively sluggish medium-term outlook reflects the gradual normalisation of credit conditions, efforts to reduce private sector indebtedness and the impact of the government's fiscal consolidation."

© 2010 AFP

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