GDP growth 'will be 1.4%' in 2013

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The economy will grow by 1.4% this year and by 2% in 2014, says the National Institute of Economic and Social Research (NIESR).

The economic research company has upwardly revised its forecasts for the UK's growth prospects after downward shifts at the end of 2012.

It says it expects unemployment to continue falling gradually, reaching around 7.4% by the middle of 2014, and consumer price inflation (CPI) should also tail off to an average of 2.5% next year.

Alongside this there is likely to be a slightly drop in public sector borrowing for the 2013/14 fiscal year, down to 7% of GDP and a further fall to around 6% the following year.

NIESR says an uptick in consumer spending is the greatest factor in the improving economic indicators for the country, but warns this may mean the recovery is not balanced and that 'greater net national saving' is needed.

A recovery in the property market is also expected to help underpin growth, but this could be just another consumer spending trend with house purchases being financed by lower interest rates.

UK economic growth for the third quarter of the year was confirmed at 0.8% recently, and those figures suggest a more balanced recovery with services, construction, production and agriculture all contributing to growth.

Azad Zangana, European economist at Schroders, says: "We do expect a slight pull back in the growth rate in the coming months, however, the surge in housing activity and the housing related consumption we expect to follow should keep the UK growing at a steady pace through 2014."

This article was written for our sister website Money Observer

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