The UK economy is expected to grow by 2.75% in 2007, with growth moderating by just under 0.25% points in 2008, according to the latest report from the Euroframe – European Forecasting Network.
Inflation has eased slightly from the highs recorded at the turn of the year and the Network expects it to moderate further, with CPI inflation hovering just above the Bank of England’s target rate of 2% over the next couple of years.
Government spending as a share of GDP is expected to fall from 39.1 in 2007-8 to 38.5% in 2010-11, allowing the general government deficit to remain below 3% of GDP.
GDP growth in the Euro area was 2.8 percent in 2006. This was higher than had been anticipated for much of 2006 and is well above the growth rates of recent years.
For 2007, the network expects GDP growth in the euro area of 2.5%. For 2008, the it expects the growth rate to be 2.2%.
Inflation in the euro area is expected to fall to 1.8% in 2007, partly in response to lower energy prices. In 2008, inflation is forecast to rise slightly to 2%. Wage growth is expected to contribute to this rise.
In other research, the National Institute of Economic and Social Research – part of the European Forecasting Network – revealed that the output of the UK economy in the three months ending in February was 0.5% higher than in the previous three months (see UK Economic Output Grows).
Meanwhile, in January the Ernst & Young Independent Treasury Economic Model (ITEM) Club Winter forecast growth in GDP of 2.9% in 2007 for the UK economy (see UK Economy Predicted To Grow 2.9% In 2007).
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