Thursday, August 4, 2011

Britain expected to miss growth target

Source: Press TV

British Chancellor George Osborne faces fresh pressure after the head of the government's fiscal watchdog said growth forecasts will be “relatively weak” and far lower than the targets.

Chairman of the Independent Office for Budget Responsibility (OBR) Robert Chote told the Independent that Osborne will most probably have to revise the 1.7 percent growth forecast he made back in March when he makes his Autumn Statement.

Chote said there “aren't many people” who believe the March target will be within the reach.

"Back in March our central forecast was for 1.7% growth this year, which at the time was fractionally more pessimistic than the average of the outside forecasters. Since then obviously we've had weaker out-turns in the first and second quarters than most people, including us, anticipated,” Chote said.

"For the second quarter the ONS (Office for National Statistics) explained a variety of one-off factors that contributed to that. As a simple matter of arithmetic, in order to get to 1.7% now you'd be looking for quarter-on-quarter growth rates of 1% in the second and third quarters of 2011, and there aren't many people out there expecting that," he added.

Britain's GDP rose by a meager 0.2 percent in the three months to July 2011 amid shrinking spending figures by consumers as rising cost of living bit.

Another factor analysts would include in their estimates of the growth, at least for the recent months, is the manufacturing sector that contracted in July for the first time over the past two years.

Based on official reports, the economy has "flatlined" for the past nine months.

This comes as the International Monetary Fund has already revised its growth forecast from 1.7 to 1.5 percent with The National Institute of Economic and Social Research (NIESR) think-tank drawing an even gloomier outlook cutting its growth forecast from 1.4 to 1.3 percent.

The NIESR said earlier this week that "in the short-term, fiscal policy is too tight, and a modest loosening would improve prospects for output and employment with little or no negative effect on fiscal credibility".

That was an echo of Shadow Chancellor Ed Balls' criticism of what he called government's policy of “cutting too fast and too deep”.

The Treasury, however, is resisting such calls and proposals to consider a “Plan B” for the economy insisting that the plans are “essential for sustainable growth”.

"The economy is growing and creating jobs. The service sector has been showing continual growth and July's figures showed its strongest level for four months. The difficult decisions the Government has taken to reduce the deficit is essential for sustainable growth," a Treasury spokesman said.

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