Sunday 19 November 2017

Experts cut UK growth forecast

The Organisation for Economic Co-operation and Development (OECD) has scaled back its forecast for UK economic growth in 2011 from 1.7pc to 1.5pc.

The forecast came in a report in which the international body warned that Britain must keep interest rates low to maintain its recovery - even if that means high inflation.

The influential think-tank again praised the coalition government's drive to tackle the deficit, saying tough measures were "vital" in the wake of the credit crunch.

But it said there were "significant headwinds" for UK plc as spending cuts bite and global trade remains in the doldrums.

Chancellor George Osborne welcomed the report's support for the UK government's programme of spending cuts to reduce the deficit.

And he said that next Wednesday's Budget will mark the beginning of a new phase in the Government's economic policy as it moves "from rescue to reform".

The OECD's latest UK Economic Survey comes against the backdrop of calls for the Bank of England to increase interest rates to bring inflation back to the Government's 2pc target.

"The UK economy emerged from the 2008-09 recession with elevated public and private debt and high unemployment," the report said.

"Strong growth and macroeconomic stability in the run-up to the crisis had hidden a build-up of significant imbalances, influenced by over-reliance on debt-finance and the financial sector, and booming asset prices.

"These imbalances need to be addressed to ensure a sustainable and balanced recovery. The Government is pursuing a necessary and wide ranging programme of fiscal consolidation and structural reforms aimed at achieving stronger growth and a rebalancing of the economy over time.

"A broad based recovery started in end-2009, but faces significant headwinds during 2011, which can be mitigated by monetary policy remaining supportive.

"The planned fiscal consolidation is needed to ensure that the fiscal position will be sustainable over time. Nonetheless, it adds to the headwinds from weak real income growth and a fading rebound in global trade.

"Monetary policy should hence remain expansionary, even if headline inflation is significantly above target, to support the recovery."

Press Association

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