Think tank warns recovery will be sluggish due to austerity measures

| July 9, 2010 | 0 Comments

The National Institute of Economic and Social Research (NIESR) is forecasting that the UK economy expanded by 0.7% in the three months to the end of June.

Official figures for the period will be released later this month but the think tank believes most of the growth occurred over April and May.

Growth is expected to fall back over the latter half of the year as austerity measures kick in - introduced to deal with Britain’s record deficit of £155 billion.

However, many economists have previously said that the Government’s massive spending cuts could pose a threat to the economic recovery.

The NIESR said: “Unfortunately, the UK economy does face headwinds. Fiscal consolidation both in the UK and the euro area will restrict growth in the short-term and there is clearly a risk that this rate of growth will not be maintained through the rest of this year.”

The Office for National Statistics (ONS) will publish its third and final estimate of the UK’s first quarter GDP figures on Monday, while its first estimate for second quarter growth will be published on 23 July.

In related news, the Government recently announced that Martin Weale of the NIESR will join the Bank of England’s Monetary Policy Committee (MPC) in time for the August interest rate-setting meeting.

Mr Weale replaces Kate Barker after her term ended on 31 May.

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