BETTER than predicted growth has been recorded in the UK this year, the government’s spending watchdog is expected to announce today.
The economy was forecast to grow by 1.2 per cent in June’s emergency Budget, but the prediction could increase to 1.8 per cent in light of surprisingly high growth.
In the three months to September, the economy expanded by 0.8 per cent, leaving GDP 2.8 per cent higher than the same time in 2009.
The Office for Budget Responsibility (OBR) will release its latest outlook on the economy at lunchtime today.
In the afternoon chancellor George Osborne will give his autumn statement to parliament, outlining the prospects for the government’s fiscal situation.
The deficit for this year could even undershoot the government’s target of £149bn.
“If current trends are replicated over the whole fiscal year, the public sector net borrowing requirement would come in around £145bn,” said Howard Archer of IHS Global Insight.
Government borrowing increased in October – £10.3bn, up from £10.1bn in October 2009 – yet overall borrowing tightened in the second and third quarters of the year, as tax revenues increased.
However, the OBR’s figures will not include contingent liabilities, such as the €7.5bn (£6.37bn) bailout to Ireland.
While the OBR may revise up growth figures for this year, its forecasts for following years remain optimistic, say economists. For 2011 the OBR has predicted a 2.3 per cent increase in GDP, and expects growth in subsequent years to reach close to three per cent.
“We think the OBR’s forecast for 2011 is likely to prove optimistic. We forecast 1.7 per cent,” said Archer. However, growth in excess of two per cent “is certainly not out of the question,” he added.