(SHARECAST) – The Office for Budget Responsibility (OBR) has lifted its estimate for economic growth this year to 1.8 percent from a previous estimate of 1.2 percent.
It also predicted that 160,000 fewer jobs will be lost due to public sector spending cuts than previously thought. It now thinks 333,000 positions will be cut over the next four years, down from a previous estimate of 490,000.
However, the OBR, which was set up by the coalition government soon after the election, has reined in its growth estimate for next year to 2.1 percent against a previous forecast of 2.3 percent. It also lowered its growth forecasts for 2012, to 2.6 percent from a previous estimate of 2.8 percent.
Growth this year has been boosted by a strong reading for the third quarter, with the economy expanding by 0.8 percent, double many analysts’ estimates. Buoyant consumer spending played a strong part, but shoppers are likely to tighten their belts, possibly after a splurge in the run-up to Christmas, after VAT is raised to 20 percent from 17.5 percent early in the new year.
Some analysts think the OBR’s estimates are still too optimistic. Earlier this month the Organisation for Economic Cooperation and Development (OECD) slashed its growth forecast for Britain to 1.7 percent for 2011 from a previous estimate of 2.5 percent.
David Kern, chief economist at the British Chambers of Commerce, said: “While the new OBR forecast is more realistic than previous official forecasts by the Treasury, we believe it is still too optimistic.”
Responding to today’s figures, c George Osborne said: “Britain is on course to both grow the economy and balance the books.”