Academic journal article National Institute Economic Review

At a Glance ...: The UK Economy

Academic journal article National Institute Economic Review

At a Glance ...: The UK Economy

Article excerpt

* The economy will grow at 1.1 per cent in 1999, but manufacturing output will decline by 0.5 per cent and there is a one in three chance of outright recession.

* Cuts in interest rates to 5.75 per cent by the end of 1999 together with higher government spending should sustain continuing growth.

* We expect public borrowing to exceed public investment by [pounds]23bn over the five years 1997-2001.

* The inflation target will be met for the end of 1999.

Despite increasing pessimism on the part of business and consumers, our main forecast is for a growth slowdown rather than falling output in 1999. Unlike the position before the last two recessions, the private sector is not over-borrowed and there is greater freedom to ease monetary policy. Underlying inflation is now at the target rate of 2.5 per cent and likely to fall substantially without sharp cuts in interest rates. Even with a reduction in rates to 5.75 per cent by the end of 1999, inflation should fall below the target rate in 2000. …

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