The British Chambers of Commerce on Monday raised its growth projections for both this year and next citing strong consumer spending driven by a pick-up in pay growth.
The UK economy is forecast to grow 1.4 percent this year instead of 1.1 percent projected earlier. The outlook for 2019 was lifted to 1.5 percent from 1.3 percent. The lobby forecast 1.6 percent expansion for 2020.
Exports are expected to remain robust on the back of strong global growth. That said, with imports also likely to continue rising at a good rate, the contribution of net trade to GDP growth is set to be limited, the BCC said.
Consumer spending growth forecast was upgraded to 1.2 percent from 1 percent, and was expected to grow by 1.4 percent and 1.6 percent in 2019 and 2020, respectively.
Despite the upgrades, the UK will remain among the worst performing economies in the G7 until 2020 at the earliest, the agency added.
Adam Marshall, Director General of the BCC, said the biggest brake on higher UK growth is a lack of concerted action to ‘fix the fundamentals’ at home, with government attention distracted by Brexit.
Inflation will begin easing in the near-term as the impact of the post-EU referendum slide in sterling fades, the BCC noted. From an expected 2.9 percent this year, inflation is forecast to slow to 2.6 percent and 2.2 percent in 2019 and 2020 respectively.
The Bank of England is expected to lift its key rate by 25 basis points in the second quarter of 2018, followed by another increase in the first quarter of 2019.
According to BCC, public sector borrowing will be GBP 13.4 billion higher over the next three years than forecast by the Office for Budget Responsibility at last week’s Spring Statement.