The UK economy will continue to make headway in 2011, but growth will be patchy and slow, according to the CBI’s latest economic forecast.
Despite a squeeze on household income, and public spending cuts, the business group expects this year’s GDP growth rate to be 1.7%, marginally lower than the previous forecast of 1.8%. Growth of 2.2% is expected in 2012, down slightly from February’s forecast of 2.3%.
Stronger net exports are expected to make an important contribution to the economy both this year and next. Export growth of 8.6% in 2011 and 7.6% in 2012 is expected to outpace the rise in imports over the period, resulting in a net positive impact on GDP.
The CBI also predicts that business investment will help drive the health of the economy, with investment growth of 8.8% in 2011 and 8.7% in 2012 forecast.
CBI director-general John Cridland said: “Although there are a number of risks to the UK’s economic outlook, we continue to expect that the recovery will make further headway this year and next, but the pace will be sluggish.
“The economy is battling headwinds of squeezed household budgets, weak wage growth, high inflation and necessary public spending cuts…
“There are some brighter spots…But the rebalancing of the economy is going to take time to feed through, and domestically it may not feel like much of a recovery for some time yet.”