2 Feb 2011

IFS forecasts: mummified economy?

Surrounded by death masks and shrouds, the IFS is giving its economic forecasts on the bowels of the British Museum. They are marginally but significantly gloomier than the OBR (proprietor: Robert Chote, formerly of the IFS parish).

Having adjusted some statistical calculations, taken into account other economies’ slow growth, they come up with predictions of persistently sluggish growth. The government’s programme of cuts will be a “major drag on growth over the next few years.”

Michael Dicks of Barclays Wealth has done a re-think of how growth is predicted. You can see his slides for yourself here on the IFS site. It means he predicts 1.5 per cent cumulative gap between his growth forecast plus the OBR’s.

But as the IFS report puts it, “the risks appear skewed to the downside” and it could be quite a lot worse. 

Both Barclays and the IFS conclude that having a government “plan B” if the economy under-shoots would be sensible and desirable.

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