London economists expect 2.5 percent growth next year

THE OBSERVER , LONDON

Sun, Dec 29, 2002 - Page 11

Britain's economy is set for accelerated growth next year as it continues to outperform the US and Europe, according to British economists.

Expectations in London's financial district are for GDP growth next year to be around 2.5 percent, compared with between 1.5 percent and 1.7 percent this year, underpinned by an increase in government spending of between 3 percent and 4 percent.

Inflation is expected to stay above the government's target of 2.5 percent for the whole of the year, driven mainly by higher oil prices, while the Bank of England is thought likely to begin a gradual series of rate rises in the second half of the year, reaching a level of 4.5 percent at the end of next year.

Gerard Lyons of Standard Chartered said: "A fragile world economy and a fragile financial sector highlight the need for growth-friendly policies at home in the UK. But with taxes already set to rise in April, this will keep downward pressure on UK interest rates."