The British economy will grow 2.5 percent in 2014 and 2.1 percent next year, after it achieved a 1.9-percent expansion last year, the fastest since 2007, a think-tank said Friday.
According to a press statement from the National Institute of Economic and Social Research (NIESR), unemployment in the kingdom will drop through the Bank of England's seven percent threshold early 2014.
Meanwhile, the inflation rate will be marginally above the two percent target this year before dropping below target in 2015, said the think-tank.
Driven by soaring domestic demand, especially consumer spending, the kingdom's economic recovery has become entrenched, said NIESR.
"We expect consumer spending to remain the key driver of recovery in 2014 and 2015, supported by continued buoyancy in the housing market," said NIESR.
Consumer spending contributed 1.6 percentage points to growth in 2013, despite the further fall in real consumer wages.
The performance of the British labor market, of which the latest unemployment rate fell to 7.1 percent, continues to be a welcome surprise, said the think-tank. Over the mid-term, however, the absence of productivity would limit real wage growth. NIESR forecast a gradual improvement in productivity, and warn that the continued stagnation poses a downside risk to the country's medium-term prospects.
NIESR also expect a fiscal surplus in 2018-19, alongside the public investment spending swelling.
"However, this reflects both a very sharp squeeze on government consumption, and continued low levels of public sector investment," NIESR said.
Source: Xinhua
