Is the Bank of England set to reduce growth forecasts for the UK?
A Reuters survey has today cast doubt on the Bank of England's forecast for UK economic growth in 2011 of 3.4%. A total of 18 people out of the 22 people surveyed expressed an opinion that the Bank of England would be forced to reduce growth forecasts for next year from 3.4% to around 2.5%. So where would this leave the UK government, the Bank of England and the UK economy?
As the UK government looks to introduce further budget cuts to try and balance the public sector deficit these figures are based upon a forecast of economic growth next year of 3.4%. If indeed this forecast is reduced to around 2.5% this will place yet more pressure on the UK government to reduce budgets further. Purely and simply, the UK government would have used growth forecasts of 3.4% for next year to estimate tax income and offset this against the need to reduce the public sector budget deficit. If tax income will be markedly lower, because of reduced economic activity in the UK, this will blow to pieces the UK budgets at the moment.
These are, to say the least, very difficult times for the UK authorities.
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