Niesr Reduces UK Growth Estimate To 2.5% Before Elections
At the start of the year, the National Institute of Economic and Social Research (Niesr) predicted that the UK’s economy would grow by 2.9%. Niesr recently readjusted its estimate and estimated the growth to be only around 2.5% which confirms a rather weak 1st quarter for the UK economy.
Niesr expects a similar trend during 2015 and believes the 1st quarter of 2016 would result in a growth of around 2.4% only. These predictions ahead of the UK election are important as UK citizens will be looking to vote for a party that is able to generate more development, job opportunities and control inflation.
The UK economy experienced a 2.8% grown during 2014 but since then has found it difficult to increase its GDP numbers. Niesr believes that this dip is temporary and the UK economy will most likely pick up once the elections are completed and new financial reforms are rolled out.
A representative from Niesr addressed the growth concerns in the UK and the country’s monetary policy. In a statement, the representative said
We expect growth to rebound through the remainder of this year. This will be driven largely by consumer spending, supported by the positive terms of trade effect from the sharp fall in oil prices. The divergence of monetary policy cycles has led to a continued appreciation of the sterling effective exchange rate. Despite this, we expect export performance to overcome continued short-term weakness and for net trade to contribute positively to GDP growth in the medium term
Niesr predicts that UK companies and businesses will create a lot more jobs in 2015, thereby reducing the unemployment rate to around 5.25%. The costs of living are also likely to fall a little during 2015 and the economy would be pretty much stable throughout the end of the year.
UK elections are scheduled to take place this week and the new estimate from Niesr will be a blow to David Cameron, the UK Prime Minister. UK polls suggest that Ed Miliband‘s Labory Party and Cameron’s conservative party are currently tied. Whatever be the end result of the election, it appears that both parties will have to work together to form a government that will be able formulate policies that strengthens the economy of the UK.
Niesr believes that Britain’s current productivity performance continues to be a “major domestic risk” and new policy must be rolled out by the new government to address these issues.
