GDP 'to grow 1.3%'

Date: 28th July 2010

The National Institute of Economic and Social Research (NIESR) has predicted that the economy will grow by 1.3 per cent this year.

Gross domestic product (GDP) will increase by 1.7 per cent in 2011 and 2.2 per cent the following year, according to the thinktank.

However, the organisation warned that consumer spending is not likely to return to pre-recession levels until at least 2015.

In terms of costs of living, inflation will remain above the government's two per cent target for the next couple of years due to the VAT increase coming into effect in January 2011.

"Economic growth this year has so far been supported by government current and capital spending and a slowing pace of destocking," the NIESR explained.

"Disappointing net trade figures from the first quarter of this mean that net trade is a drag on GDP growth for the year as whole."

The institute concluded by stating that the chancellor, George Osborne, will need to keep an eye on the state of public finances in the near future.

Posted by Anthony Burns