UK’s NIESR: Plan to double economic growth unlikely to succeed

The UK think tank, the National Institute of Economic and Social Research (NIESR) showed in its latest report on Thursday, there is only about 20% probability of the UK economic growth doubling its pace of expansion, in the face of the country’s chronic run of poor productivity.

Key Findings:

Javid has said he wants to raise the underlying pace of economic growth to around 2.75% a year, a rate last achieved in 2006.

NIESR said such an acceleration would be difficult.

His plans to raise annual public investment by 20 billion pounds ($26 billion) were likely to boost the level of economic output and productivity by just 0.4%, and only after more than a decade.

Arno Hantzsche, Principal Economist at NIESR, noted: “The chancellor’s aim of raising growth towards the post-war average - nearly 3% - is quite unrealistic.”

Meanwhile, NIESR director Jagjit Chadha said: “A hurried fiscal boost we think may be stymied by a lack of current capacity in the economy, or possibly by creating unrealistic short-term expectations about the extent to which that can quickly bring about an acceleration of living standards.” 

FX Implications:

Following Wednesday’s volatile trading session, the GBP/USD pair sees quiet Asian trading so far, although the bears remain in control.

At the press time, the cable drops 0.13% to trade near 1.2985 region.