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UK economy to enjoy stronger growth this year, says OBR

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The independent Office for Budget Responsibility (OBR) has revised its growth predictions for the UK economy.

Back in June, the OBR had forecast growth of 1.2 per cent this year.

In its latest autumn report, delivered ahead of the Chancellor’s autumn statement, the OBR said that the economy will expand by 1.8 per cent in 2010.

However, it believes that the UK’s economic performance in 2011 will not be as strong as previously anticipated.

Whereas in its June report  the OBR had forecast growth of 2.3 per cent for next year, that figure has been revised down to 2.1 per cent as a result of the likely impact of the spending cuts.

The rate of growth will be at its slowest in the first quarter of 2011, when it will fall to just 0.3 per cent.

The sluggish rate of growth should continue into 2012 when the OBR said that growth will hit 2.6 per cent, down from the 2.8 per cent it had predicted.

There was better news on the employment front. The OBR, which was set up by the Chancellor in May to provide independent growth and borrowing forecasts, said that the number of public sector job losses expected over the next four years will not now be as high as the 490,000 announced in the summer.

According to the OBR’s latest data, only 330,000 jobs are set to go.

The overall employment picxture has brightened somewhat too. After a peak of just over 8 per cent unemployment in 2011, the jobless rate should drop to just over 6 per cent by 2015. The take up in the labour market will come about as the result of the creation of one million private sector jobs.

As far as public borrowing is concerned, the forecast for the current financial year, 2010/11, is lowered slightly from £149.5 billion to £148.5 billion.

Robert Chote of the OBR said that the economy will continue to recover from the recession but at a slower pace than the recoveries of the 1970s, 1980s and 1990s.

The budget deficit is predicted to decline from 11.1 per cent of GDP this year to 1 per cent by 2015/16.

The forecast for debt is marginally lower than in the June figures but should still peak at around 70 per cent of GDP.