Analysts sceptical at growth forecasts
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Analysts were unconvinced by Chancellor Alistair Darling’s predictions of bullish growth after 2010.
Darling revised his forecast for growth over the next three years. He said GDP would grow by between 1 and 1.5 per cent over the next year and would grow by 3 to 3.5 per cent in 2011/12.
Ignis Asset Management chief economist Stuart Thomson says these forecasts were the “major inconsistency at the heart of the Budget”. He says: “To fulfil the Chancellor’s expectation of GDP growth, consumers must lower their savings ratio to compensate. This prospect is extremely unlikely, if not impossible, given the outlook for relatively high unemployment and negligible pay growth.”
Sterling reacted negatively to the Budget, falling by nearly 1 per cent against the dollar.
Travelex head of UK trading desk Mark Bolsom says: “For a strong and positive reaction from the pound, we needed to have seen Darling tackle the deficit in a really decisive and detailed way. This did not happen.”
Independent pension consultant Dr Ros Altmann says Darling’s figures are not credible but the markets will wait until the first Budget after the election to decide the UK’s fate. She says: “We have been living beyond our means and must cut back spending to affordable levels.”
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