British economy far from recovery despite growth forecast

The current anaemic growth of the British economy will continue through this year and into 2014, with a slight improvement in performance, the National Institute of Economic and Social Research (NIESR) said in its latest quarterly forecast, published Thursday. The NIESR upgraded its forecast for GDP growth in 2013 to reach 0.9 percent, an increase on the 0.7 percent in the NIESR February forecast. Simon Kirby, senior research fellow, told journalists, "We predict relatively weak growth through this year accelerating slightly into 2014 and into 2015. Growth rates we are talking about are nowhere near what you would be talking about for potential recovery in the British economy." Growth in 2014 was predicted at 1.4 percent, still a long way off trend growth of 2 to 2.5 percent. Unemployment will remain roughly flat at about 8 percent throughout this year and through 2014, the NIESR forecast predicted. this compares favorably with the unemployment rate of 12 percent in the eurozone. The NIESR prediction put inflation rising to a little above 3 percent (it is currently 2.8 percent, with a Bank of England target of 2 percent), falling back to 2.3 percent next year. Public sector borrowing was forecast to decline slightly to 7.1 percent for 2013, well above the target outlined by Chancellor of the Exchequer George Osborne in his first budget of 2010 at the beginning of the coalition government's term in office. The lacklustre performance of the British economy since the financial crisis broke in the first quarter of 2008 has seen it plunged into two recessions, and the threat of a third consecutive recession hung over it until growth figures for the first quarter of 2013 were published last week which showed 0.3 percent growth. However this merely wiped out the -0.3 percent loss of the final quarter of 2012. Kirby commented, "This has stopped economists obsessing about a triple-dip recession. We do not expect Britain to dip into a triple recession over the next couple of years but the economy remains relatively weak and there are significant risks from the external environment given that we are so intertwined with the euro area economy." Kirby added, "The important point about the British economy is that it has been stagnant for two and a half years. We are expecting relatively little growth this year." NIESR estimates it would be around about 2015 Q1 before there was a return to where the British economy was at its pre-financial crisis peak. Jonathan Portes, director of NIESR, argued that now was a good moment to invest in infrastructure spending to boost economic growth. Portes said, "With very low long-term nominal and real interest rates, when you clearly have areas where you could spend money, which would have substantial medium and long-term benefits for the economy in terms of infrastructure it would be sensible to borrow to invest, as you could afford to do so at no risk at all and the multipliers are very high."