CBI downgrades GDP growth

Posted at February 11, 2016 | Categories : News

The CBI has downgraded its GDP growth forecast for both 2016 (to 2.3%, from 2.6% in November) and 2017 (to 2.1%, down from 2.4%).    

The adjustment for 2016 is driven chiefly by revisions to historical data which show that momentum in the UK economy over 2015 was slightly less than previously thought. Weak productivity and wage growth, leading to a slower rise household spending, is also a factor.

But while the global economic outlook is weaker, particularly given concerns over China and its effect on emerging markets, the CBI reckons that the UK’s direct exposure is limited.

Rain Newton-Smith, CBI director for economics, comments: “It’s important to remember is that the UK has largely remained resilient amid recent global turbulence. We have a sound economic footing at home, driven by strong job creation and business investment coupled with low inflation supporting household spending.

“But with softer GDP growth and slower wage growth tempering inflationary pressures, UK interest rates are likely to remain unchanged until the end of this year.

“Our view on the global economy remains largely unchanged: India is a beacon among emerging markets, with growth likely to remain around 7% in 2016 and 2017, outpacing China (5.7% in both 2016 and 2017).

“Both the elephant and the dragon will make a large contribution to global growth in the years ahead. However, some emerging markets remain vulnerable to low commodity prices, large debt overhangs and capital outflows.”

Finally, the CBI expects house price inflation to slow as interest rates increase, with house prices rising by 6.4% in 2016, slowing to 2.8% in 2017.