UK GDP forecast to grow faster than anticipated
UK GDP growth forecasts for this year have been revised higher by the National Institute of Economic and Social Research.
The UK’s economy will expand by 2.9 per cent in 2015, according to research from the National Institute of Economic and Social Research (NIESR). The think tank made significant revisions to its estimates on GDP growth, raising its forecasts to just under three per cent from its previous forecast for 2.5 per cent of growth.
NIESR said the main reason for its upgraded outlook was “almost entirely due to the sharp fall in the oil price”, where prices crashed over 50 per cent since last summer and plunged as low as $45 per barrel.
Boost seen in consumer spending and trade balance
Oil’s decline has recently been cited by many experts as a boon for the consumer and for businesses. This has been backed up by the research, and should translate into a boost to consumer spending of over three per cent this year. Furthermore, the report suggests that lower oil prices should improve the UK’s trade balance.
Once the positive effects of low oil prices have worn off, NIESR foresee a recovery in the global economy that should support growth in exports.
“The outlook is consistent with economic recovery, and we expect economic growth to outpace growth in long-run capacity for a number of years,” the report said.
Unemployment will range around 5.25 per cent
Looking at 2015, the labour market should remain healthy and the unemployment rate is forecast to fall to around 5.25 per cent by the end of 2015. Furthermore, the report suggests that the rate will remain close to this level through 2016.
Much of it will hinge on the results of the general election in early May, which has the potential to change these projections if a new government were to implement a different fiscal plan. However, we can be certain that the disinflationary pressures of lower oil prices will be a positive boost to the UK economy.