A leading British think-tank has warned that economic growth in the U.K. will remain slow in the coming years and that the country’s home prices could fall dramatically in real terms over the next five years, according to The Daily Telegraph. On Thursday, the National Institute of Economic and Social Research forecast that the U.K.’s gross domestic product would add only 1.4% during 2011, which is 0.3% lower than the official outlook. The group said the economy would grow only 2% in 2012, and remain below its potential rate of growth and under pre-recession growth levels until 2013.
The report from the NIESR detailed forecasts for consumer price inflation and consumer spending, with the annual rate of price growth expected to peak at 4.5% in 2011, before slowing to 1.9% the following year. Consumer spending is predicted to fall by 0.6% in 2011, while borrowing is expected to reach more than double official forecast at 3.6% of gross domestic product by 2015-16. Additional home prices are expected to drop in real terms by 4.5% in 2011, and could fall by as much as 20% in real terms over the next five years, adds Bloomberg.
