The UK’s economy will continue to grow this year and next, but at a sluggish pace, a leading think tank has warned.
According to the latest report from the National Institute of Economic and Social Research (NIESR) , gross domestic product (GDP) will grow by just 1.4% this year – 0.3% lower than the government’s forecast in March – and 2% in 2012.
The report suggests that any economic growth over the next two years will come mainly from net trade, and predicts that economic expansion will not grow faster than its current rate of 2.1% until 2013, as the effects of government spending cuts, higher taxes and rising inflation are felt.
However UK exports are expected to grow by 6.9% this year and 4.3% in 2012, with imports rising by just 1.4% and falling by 1.1% next year as consumer spending declines.
Simon Kirby, a NIESR economist, told Growing Business that he expects the “UK economy to continue to grow” but that “the recovery will be weak”.
He also warned that while the government is on the right track with the fiscal policy, “it is too much too soon”, for the spending cuts, although he added that the private sector is expected to grow robustly this year and next as the public sector contracts.
In a separate report on the global economy, the NIESR has forecast that worldwide growth will decelerate from 5.2% in 2010 to 4.4% in both 2011 and 2012.
World trade growth is set to slow from 11.9% in 2010 to just 6.2% this year, which the NIESR says is because of the sharp rise in oil prices contributing to a surge in inflation.