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Wednesday 23rd of February 2011
November 29, 2010    

OBR revises UK growth prospects

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by Kay Murchie

The Office of Budget Responsibility (OBR), which was established in May, has today revised its growth forecast for the UK for the 2010 year.

The independent body, which was set up by the coalition Government to assess the state of public finances, has lifted its economic growth forecast from 1.2% to 1.8% - slightly higher than the 1.7% expected by economists.

However, the OBR has downwardly revised its estimate for growth for the next two years, expecting growth of 2.1% in 2011 and 2.6% in 2012, down from 2.3% and 2.8% respectively.

The announcement from the OBR comes just a matter of hours before Chancellor George Osborne will provide an update on the UK economy.

Both announcements will be closely monitored with markets looking for clues as to how well the Government’s deficit reduction plan is progressing – particularly in view of the debt crisis in Ireland and fears of contagion within the euro zone.

Mr Osborne is expected to say that the economy is gradually turning a corner and a double dip recession is unlikely.

In the meantime, the body is forecasting that unemployment will peak at just over 8% in 2011 and will fall gradually to just over the 6% mark by 2015.

It also said job losses in the public sector will not be as high as previously estimated, expecting 330,000 jobs to go, rather than the 490,000 it forecast in June.

Meanwhile, it is estimating that house prices will fall by 3.1% in 2011 - higher than a previous estimate.

A statement from the OBR said: “The economy will continue to recover from recession, but at a slower pace than in the recoveries of the 1970s, 1980s and 1990s.”

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