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Will economic growth forecasts of 2.5% in 2011 seem optimistic?

This week saw the majority of economists in the UK pouring cold water on Bank of England economic growth forecasts for 2011. A poll by Reuters showed that the majority of economists in the UK believe that real economic growth in 2011 will be 2.5% against the Bank of England's current forecast of 3.4%. But will forecasts of growth in the region of 2.5% also prove optimistic?

Economic growth forecasts this week were based upon various changes to the UK budget introduced by the government and further cuts predicted for the future. However, there appears to be a growing feeling that what we have seen so far from the coalition government is literally just the tip of the iceberg with enormous cuts to follow.

If UK economists have overestimated economic growth in 2011, despite the significant reduction on the Bank of England's earlier forecast, then the UK could be in serious trouble. A 0.9% reduction in estimated economic growth in 2011 translates into an enormous amount of productivity, taxes, income and business within the UK. Those who believe that the UK economy is "over the worst" may well need to review their own projections for the future.

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