UK economy may have contracted in 2012

The UK economy may have contracted by 0.1% in 2012, according to the Office for Budget Responsibility (OBR), the independent body that makes economic forecasts for the government.UK economy may have contracted in 2012It is a big revision from the time of the Budget in March, when it said that the economy would grow 0.8% this year.  Growth forecasts for the next five years were also cut.

The OBR is predicting that gross domestic product (GDP), which is the measure of all the goods and services produced in the economy, will contract in the last three months of 2012, having only emerged from recession in the previous quarter.

Mr Osborne quoted the OBR as saying: “The weaker than expected growth can be more than accounted for by over-optimism regarding net trade”.

The OBR had previously forecast that the eurozone’s economy would recover in the second half of this year. However, its continued contraction has hit the UK’s exports to the eurozone.

Before the statement, many analysts had predicted that the budget deficit, which is the amount the government is having to borrow in the current year, would be higher than it was last year.

However, it is now forecast to fall from £121 billion in 2011-12 to £108 billion in 2012-13.

There was also a reduction in the deficit of £11.5 billion in the current year as a result of the Asset Purchase Facility.

The OBR’s Robert Chote says the deficit is shrinking but more slowly than previously forecast

As a result of the Bank of England’s quantitative easing programme, the central bank currently owns a lot of the government’s debt.

If anybody else had lent money to the government it would have had to pay interest on those loans.

The government has now decided it should not be paying interest to the Bank of England, and the benefit of that has reduced the deficit and will continue to do so for the next four years.

Excluding the effects of the Bank of England money gives a figure of £121.4 billion in 2011/12 and a forecast of £119.9 billion for 2102/13, which demonstrates the importance of the inclusion of the assumed receipts from next year’s 4G spectrum auction, without which the deficit would indeed have risen.

January 8, 2013 · Home Based Jobs · Comments Closed
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