Abstract
More than four years after the start of the recession, the economy is well over 4 per cent below its pre-crisis peak. This persistent weakness is unprecedented. Growth this year will be close to zero, but about 2 per cent in 2013. This is essentially unchanged from our January forecast. Although our inflation forecast has increased, largely as a result of the increase in oil prices, we still expect it to fall below target by the end of the year We expect the cyclically adjusted current budget to be in slight surplus in 2016–17. We expect the unemployment rate to rise to almost 9 per cent at the end of this year, and to remain elevated throughout the forecast period. This will do permanent damage to the UK's productive capacity.
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