The UK gross domestic product (GDP) is forecasted to grow by 1.2 per cent in 2013, up from erstwhile forecast of 1 per cent in May, signalling the growing vigour across a range of sectors such as services, construction and manufacturing.
The Confederation of British Industry (CBI), a leading business lobby, has raised the GDP forecast following a better-than-expected performance in the second quarter.
For 2014, the CBI predicted that the economy would grow by 2.3 per cent, up from the earlier 2 per cent due to increase in disposable incomes besides growth in business and housing investment demand.
The group, however, expects rebalancing of the country’s economy to begin next year. It expects the country’s exports to drive the economy next year, as growth in the Euro area and worldwide is likely to return by then while improved domestic market will increase imports.
Stephen Gifford, director of economics at CBI, said: “As the Eurozone returns to growth and global momentum continues to build we should see a gradual increase in business investment and UK trade.
“But despite a relatively stable global environment over the last year, risks remain as financial markets move to a new regulatory environment and the Eurozone continues to evolve. Meanwhile, emerging markets are facing structural challenges, particularly as China rebalances towards domestic consumption, which indicates muted growth prospects.”
Household spending is expected to boost in the second half of 2013 and throughout next year due to growth in disposable income. Business investment is likely to grow by 7.3 per cent in 2014, compared to negative 2.8 per cent this year.
Export growth is likely to rise from 0.7 per cent this year to 4.9 per cent next year. However, the contribution of trade to economic growth is likely to remain marginal next year.
According to the CBI forecasts, unemployment rate will touch 7.8 per cent in 2013 and decline marginally to 7.6 per cent in 2014, while interest rates may remain unchanged till 2014.
The CBI believes that as the economy pulls through, companies will make use of their current workers than go for new appointments.
John Cridland, director-general of CBI, said: “The economy has started to gain momentum and confidence is picking up, but it’s still early days. The government needs to get behind talented UK businesses to help them break into new export markets and sell great British products and services around the globe.”