BRITAIN will have to endure a further deterioration in the unemployment rate over the next two years while net debt will rise for longer than the Treasury currently expects, a leading think-tank will say today.
In its quarterly forecasts, the National Institute for Economic and Social Research (NIESR) predicts that the jobless rate will only peak in the third quarter of 2011 and at 2.9m – or 9.2 per cent of GDP.
Simon Kirby at the NIESR says: “The unemployment rate stabilised in the second half of 2009.
This will prove to be a hiatus rather than a turning-point and we expect unemployment to carry on rising over the next two years”
The think-tank also says that the plans for fiscal consolidation will not be sufficient to start reducing net public debt as a share of GDP by 2015-16, as chancellor Alistair Darling had forecast. To achieve this, additional retrenchment will be needed.
After poor growth figures for the fourth quarter, NIESR expects faster growth in the first quarter of 2010 and beyond – between 1.1 and 2.0 per cent over the next two years.
In its global forecasts, it says government spending in China was the driving force behind the rebound in the world economy.