According to the European Commission, the economy in the UK is forecast to grow by 2.5 percent in 2015. The British Chambers of Commerce (BCC), Britain’s leading business lobby group, agrees with this prediction.
The European Commission has said momentum in the economy might continue amid high spending by consumers and businesses. Gross domestic product may grow 3.1 percent this year and 2.7 percent in 2015, up from projections of 2.7 percent and 2.5 percent made in May, the European Union’s Brussels-based executive said in a statement this week. It sees growth slowing to 2.5 percent in 2016.
“The strong growth enjoyed in the first half of 2014 is expected to continue, driven by private consumption and investment,” the commission said. “Net exports are projected to detract from growth.” Also, as the vast majority of EU economies returned to growth over the course of last year, expectations were raised that Europe’s economic recovery was becoming more broadly based and self-sustaining.
In the first half of this year business investment may increase to between 7 percent and 10 percent a year from 2014 to 2016, up from 3.2 percent in 2013, the forecasts show. The economic improvement may help to create jobs and boost disposable income, according to the commission, which sees the unemployment rate improving to 6.2 percent this year and picking up pace further thereafter. U.K. inflation, now at 1.2 percent, might accelerate to only 1.9 percent by 2016, remaining below the central bank’s 2 percent target. The government budget deficit may decrease to 3.2 percent of the GDP in the 2016-2017 fiscal year from 5.2 percent for the year ending in March.
Annual GDP growth in the EU this year is now projected to be 1.3 percent, while growth in the euro area is expected to be 0.8 percent. Economic activity, however, may gradually strengthen over the course of 2015 and accelerate further in 2016. This would be a result of the legacies of the recession fading away, structural reforms starting to bear fruit, labour markets improving and more supportive policies and financing conditions being put in place. Against this background, growth in the EU is forecast to rise to 1.5 percent in 2015 and then increase modestly to 2.0 percent in 2016. While in the euro area, growth is forecast to reach 1.1 percent and then 1.7 percent. Domestic demand is expected to be the major driver of growth over the forecast horizon.
A steady recovery is nonetheless expected in non-European advanced economies. Notably, in the US, strong momentum in the economy might be supported by lower fiscal conditions and the continuation of accommodative monetary policies. The growth outlook for emerging market economies is supported by relative resilience in emerging Asia, although a gradual deceleration of activity is likely in China. Global growth this year is now expected at 3.3 percent, increasing to 3.8 percent in 2015 and 4.1 percent in 2016.
In Italy, GDP growth is projected to turn positive early next year. In Spain, GDP growth is projected to increase, supported in particular by rising employment and easier financing conditions. Growth in the Netherlands is expected to firm as private consumption picks up again on the back of increasing employment and the gradually recovering housing market.
The deficit–to-GDP ratio, in both the EU and the euro area, is set to decrease further this year, albeit more slowly than in 2013, to respectively 3.0 percent and 2.6 percent. Government deficits are forecast to continue improving over the next two years, helped by strengthening economic activity. The fiscal policy stance is expected to be close to neutral in 2014 and 2015, as the fiscal effort, measured in terms of changes to the structural balance, aims to be broadly nil in both years. The debt-to-GDP ratios of the EU and the euro area are expected to peak next year at 88.3 percent and 94.8 percent respectively.
What else might add to the predicted growth for the economy?