Who’s next for the downalator? (*)
Before everyone gets too laid back about the second dip of this recession, I thought it might be useful to remind ourselves that City and other voices that supported the austerity programme were forecasting till very recently that growth would stay positive. Just two months ago, that was the official line from the IMF, employers’ organisations, City economists and, of course, the Office for Budget Responsibility.
Now it seems like a long time ago …
Today the British Chambers of Commerce slashed their forecasts for GDP growth, to a fall of 0.4 per cent in 2012, followed by a rise of 1.2 per cent in 2013. Previously they had expected 0.1 per cent growth this year and 1.9 per cent next year.
This follows the CBI yesterday, cutting their forecast for 2012 from 0.6 per cent growth to minus 0.3 per cent. Their forecast for 2013 is cut from 2 per cent to 1.2 per cent.
And the average City forecast is now for negative growth this year:
The IMF still expects growth in 2012, but their forecast has been cut by even more: from 2.3 per cent to 0.2 per cent.
All of which leaves the Office for Budget Responsibility looking exposed – their March forecast of 0.8 per cent growth in 2012 and 2.0 per cent in 2013 looks very optimistic. But can the OBR afford to revise downwards when they publish theuir next Economic and Fiscal Outlook in November? Because, if they do, they will continue their record of revising down their forecast for either 2012 or 2013 in every single forecast they have issued:
- In the June 2010 Pre-budget Forecast, they expected 2.8 per cent growth in 2012 and the same again in 2013;
- In their November 2010 Economic and Fiscal Outlook, the figures were 2.6 and 2.9 per cent;
- In the March 2011 EFO, this had come down to 2.5 amd 2.9 per cent;
- By November, this had fallen to 0.7 and 2.1 per cent;
- And in March this year the forecasts were down to 0.8 per cent this year and again next year.
Another reduction and people might come to the conclusion that the OBR was always too optimistic about austerity.
(*) Obscure reference for Doris Day fans