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Caution on rate of growth

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The rate of growth in the UK economy may have an effect on the pace of planned spending cuts, a leading think-tank has said.

The Organisation for Economic Co-operation and Development (OECD) has warned that should growth in the UK economy remain subdued, a case may be made for slowing the rate at which pubic spending cuts are implemented.

In a press interview with the Times, Pier Carlo Padoan, chief economist of the OECD, identified what he called “scope for slowing the pace”.

The OECD has downgraded its predictions for UK economic growth a second time. It is now forecasting that the economy will grow by 1.4 per cent in 2011, down from the 1.5 per cent estimated in March and a previous prediction of 1.7 per cent.

Next year, the OECD believes that the UK will experience growth of 1.8 per cent rather than 2 per cent.

Pier Carlo Padoan commented: “We see merit in slowing the pace of fiscal consolidation if there is not such good news on the growth front.

“We have seen that the growth numbers are a bit weaker than expected. Should that continue to be the case, there is scope for slowing the pace of the spending cuts.”

The independent Office for Budget Responsibility has pinned its colours to growth rates of 1.7 per cent this year and 2.5 per cent for 2012.