Global Economic Growth To Remain Robust In 2007

At present, says OPera Media, the UK economy is finely balanced. Despite growth quickening to above its long-term average in the second quarter at 0.8%, annual output is expected to grow in line with the long-term trend rate of 2.5%.

The consensus estimate from the ‘HM Treasury Forecast of the UK Economy’ shows a slight moderation in expansion for 2007 at 2.3%.

The short-term forecast sees inflation continuing to run above the 2% target, before moderating in the mid-term. OPera says that the risks to this inflation projection are: the prospects for world growth; the strength and duration of the recovery in consumer spending; the outlook for energy and commodity prices and their effect on domestic pricing; and the diminishing margin of spare resources within business and the labour markets.

The risks to inflation and growth remain broadly balanced, though there is a greater than usual uncertainty over the outlook for inflation, particularly in the near term. If inflation continues to run above the 2% target, base rate rises will undoubtedly follow.

According to a recent forecast from the National Institute of Economic and Social Research, the UK economy is set to grow at or just above 2.5% per annum both this year and next (see UK Economy Set To Grow At 2.5%).

OPera adds that in the US, exceptionally strong growth in the early part of the year has moderated, with private consumption weakening against a backdrop of higher interest rates, a cooling housing market, lacklustre employment gains and high gasoline prices. The IMF predicts GDP growth for the full year at 3.4%, slowing to 2.9% in 2007.

The outlook for emerging European economies is for continued solid growth within the region, at 5.0% for 2007, says the analyst.

It adds that Japan’s recovery continues to take hold, with GDP growth for 2006 estimated at 2.7%, moderating to 2% in 2007.

Source: IMF