The UK economy to make a recovery

How UK economic prospects and policy will impact the economy

The UK economy is set to make a recovery. We look at the elements that will contribute to this growth.

• The UK economy will recover at a modest pace in 2013, with average real GDP growth of around 1%-2% after around zero in 2012.
• Net exports will make a small positive contribution to growth in 2013, reversing the negative contribution seen in 2012. UK exports to the BRICs and other emerging economies will continue to rise relatively rapidly while exports to the Eurozone will remain much more subdued.
• Inflation will remain above its 2% target in 2013, although not by enough to cause the Monetary Policy Committee to raise interest rates in response given the continued fragility of the recovery.
• There will be no change in the current inflation target, but Mark Carney will make his mark on the UK policy debate as the new Governor of the Bank of England.
• Unemployment will continue to trend down at a gradual rate, with private sector net job gains outweighing public sector job cuts.
• The Chancellor will stick to his ‘Plan’ for fiscal tightening, with a broadly neutral Budget in March followed by further details of spending plans for 2015-16 announced in the summer.