OBR forecast too optimistic
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Ignis Asset Management chief economist Stuart Thomson bel-ieves the Office for Budget Res-ponsibility has been too optimistic on its forecasts for growth.
Chancellor George Osborne revealed that GDP growth this year is set to be 1.2 per cent, rising to 2.3 per cent in 2011 and 2.8 per cent in 2012. Thomson says those figures mean the Government’s fiscal tightening measures will lower growth by 0.1 per cent this year and 0.3 per cent in 2011, with no effect in 2012, but he believes growth will be around 1.5 per cent next year.
He says: “Medium-dated forward gilt yields are above 5 per cent which does not support the OBR’s expectation of strong business investment growth.”
Schroders European economist Azad Zangana adds: “Our forecast for 2012 is 2.1 per cent compared with the OBR’s 2.8 per cent. We think the longer-term OBR forecast looks optimistic.”
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