Osborne set to cut UK growth predictions

Roland Jackson London

Britain is expected to cut its growth forecasts this week in a key budget update, as Finance Minister George Osborne increasingly faces calls to rein in the government’s tough austerity measures.

Osborne is due to deliver his autumn statement before parliament on Wednesday, alongside the latest growth and borrowing forecasts from Britain’s Office for Budget Responsibility (OBR) fiscal watchdog.

Experts predicted that the OBR would cut its forecasts for gross domestic product (GDP) with the country’s economy buffeted by state austerity, inflationary pressures and the debt crisis in key trading partner the euro zone.

Weaker economic growth would slash future tax receipts, hitting the coalition government’s purse and sparking upward revisions to its official borrowing targets, analysts say.

Osborne forecast in March that the economy would grow by a weaker-than-expected 0.8 percent this year, followed by 2 percent next year and 2.7 percent in 2014.

“The growth forecast will have to be revised down, not only because the euro area and hence exports will remain weak, but also because real household incomes continue to decline partly due to the persistence of higher-than-expected inflation,” Daiwa Capital Markets economist Chris Scicluna said.

“Overall, I think it will be difficult to justify a growth forecast much above 0.5 percent in 2013. Against the backdrop of the flat-lining economy, the chancellor would be ill-advised to try to tighten fiscal policy,” he added.

Recent data showed Britain escaped from recession in the third quarter, with GDP growing 1 percent thanks to the Olympics and rebounding activity after public holidays in the second quarter. – Sapa-AFP