Britain set to slash economic growth forecasts
Britain is expected to slash its official economic growth estimates on Tuesday, the eve of a nationwide strike and a day after the OECD warned that the country was heading for a double-dip recession.
Finance minister George Osborne unveils his autumn statement alongside updated growth forecasts from the independent Office for Budget Responsibility (OBR) as Britain attempts to shield itself from the eurozone debt crisis.
Although not a member of the eurozone, Britain is a key trading partner of the neighbouring bloc. Osborne's review and the latest official forecasts are due at 1230 GMT.
The OBR is expected to cut its growth predictions as the economy buckles under the weight of the eurozone crisis, austerity measures and a squeeze on consumer spending.
However, Osborne will stick to the coalition government's plans to slash the deficit and axe spending, in order to safeguard Britain's prized top-level credit rating amid deep concern over European sovereign debt.
The Conservative-Liberal Democrat coalition's plans have already sparked anger in the public sector, with up to two million people expected to go on strike on Wednesday over pension reforms.
"I think the public understand that Britain has huge debts that it has built up. These debts need to be dealt with. The public also understand that the eurozone (crisis) makes that more difficult," Osborne said Monday.
"But what they want the government to do is stick to the plan that will take us safely through the storm and invest for the long-term future.
"They have had enough of politicians who think there is a quick fix solution who say you can borrow a bit more to get us out of debt."
The OBR fiscal watchdog predicted in March that British gross domestic product would grow 1.7 percent in 2011 and by 2.5 percent in 2012.
But in a gloomy development on Monday, the Organisation for Economic Cooperation and Development (OECD) said that the economy will shrink in the final quarter of 2011 and the first quarter of 2012.
That would place Britain in a so-called "double dip" recession. The economy has struggled to fully recover after clawing its way out of a vicious downturn that ended in the third quarter of 2009.
"What is clear from the OECD is that these are very difficult times for many countries in the Western world," noted Osborne, whose official title is Chancellor of the Exchequer.
He will also unveil an initiative in which the government will underwrite bank loans worth up to £40 billion (46.65 billion euros, $61.75 billion) to struggling small businesses, hoping to boost activity.
In addition, Osborne will outline plans for an ambitious £30 billion infrastructure programme to invest in the development of roads, railways and high-speed broadband Internet services.
The Treasury will seek to lever in £20 billion of private investment from pension funds for the plan and will not raise state borrowing.
Weaker-than-expected growth, however, is expected to hit the government's borrowing targets.
The OBR estimated in March that borrowing would fall to £122 billion in 2011-12 and then £101 billion in the following financial year.
The public sector borrowed £141.1 billion in 2010-2011, undershooting the OBR's target of £145.9 billion.
© 2011 AFP