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Economic researcher revises down British GDP growth forecast

Xinhua, May 6, 2015 Adjust font size:

British economic growth expectation was revised down by an independent economic researcher, due to the weak growth in the first quarter of 2015.

Britain's gross domestic product (GDP) is expected to grow by 2.5 percent in 2015, lower than its previous estimate of 2.9 percent in February, as the growth in Q1 2015 was "considerably weaker" than expected, said National Institute of Economic and Social Research (NIESR) in its quarterly forecast report Wednesday.

British GDP was estimated to have increased by 0.3 percent in the first quarter of 2015 compared with growth of 0.6 percent the fourth quarter of 2014, announced the Office for National Statistics (ONS) last week.

The institute said the deceleration is likely to be temporary, it expects growth to rebound through the remainder of this year, driven largely by consumer spending. It also lifts up its projection for growth in 2016 from 2.3 percent to 2.4 percent.

NIESR expects that British real gross national income to grow by 3.6 percent and 2.8 percent respectively for 2015 and 2016; unemployment rate would drop to 5.3 percent in 2015 from 5.7 percent in 2014, and stabilize at that level in 2016.

NIESR substantially lower British inflation expectation in 2015 and 2016, from previous 0.8 percent and 1.9 percent to -0.1 percent and 1.4 percent, as the "lagged effects" of commodity and exchange rate development pass through to consumer prices.

In spite of this, NIESR expects British central bank's monetary policy to begin tightening in Q1 2016 as temporary oil price and exchange rate effects dissipate. And after that, the benchmark interest rate, which is currently set at 0.5 percent, will continue to increase by roughly 0.5 percent a year, before it reaching three percent by 2020, noted NIESR. Endit