Economic Review - Outlook for 2006 Recovery or Relapse?
Mondaq Business Briefing › Nbr. 2006, January 2006
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Economic Review - Outlook for 2006 Recovery or Relapse?
Foreword
by John Connolly Senior Partner & Chief Executive Deloitte In this Review, Roger Bootle, Economic Adviser to Deloitte, looks at whether the slowdown[sz]in economic growth seen in 2005 is likely to mark the beginning of the end of a golden era[sz]in the UK economy or simply a pause for breath before the economy embarks on another[sz]period of rapid expansion. Roger argues that the household and public sectors need to consolidate their finances further[sz]before the economy can grow at rapid rates once again. He concludes that 2006 is likely to[sz]be another year of sub-trend growth with the outturn roughly 2%. Roger notes, though, that there are reasons why things could turn out better. First, it is[sz]possible that the bulk of the slowdown in economic growth in 2005 can be attributed to the[sz]doubling in the oil price. So even if oil prices remain at their current high levels, the negative[sz]effects on growth should fade away over the coming quarters. Second, the modest impact on[sz]inflation from the surge in the oil price and the apparent soft landing in the housing market[sz]boost the prospects for economic growth. Roger also believes that inflation will fall back sharply and that interest rates should fall to 4%.[sz]Moreover, he thinks that a combination of lower interest rates and a lower pound should see[sz]UK economic growth accelerate in 2007, though the prospect of a sharp downturn in the US[sz]economy means that any recovery is unlikely to be spectacular. In any case, this is likely to be[sz]another difficult year to get through first. Once again, I hope that th...See the full content of this document
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