NIESR expects global growth of 3.5% in 2012 & 4% in 2013 (provided there is a ‘successful resolution’ of the Euro Area crisis.) Despite this, NIESR expect a mild recession in the Euro Area and the UK, with the UK economy contracting by 0.1% this year – but growing 2.3% in 2013 (provided the Euro crisis ends well).
Unemployment is expected to reach 9% this year and stay high till after the next election: “Unemployment at this elevated level for such a long period is likely to do permanent damage to the supply side of the economy, with large long-run economic costs.”
CPI inflation is expected to fall to 2.2% this year and 1.4% in 2013. The cyclically adjusted current budget is forecast to return to balance in 2016–17.
“The UK economy currently suffers from deficient demand; the current stance of fiscal policy is contributing to this deficiency. A temporary easing of fiscal policy in the near term would boost the economy.”