Executive Summary

摘要

Following the 5% fall during 2009, economic activity grew in the first three quarters of 2010. Despite concerns regarding the direct effects of public sector spending cuts on economic activity and the indirect effects on private sector sentiment and then, in turn, on the economy, activity is still expected to grow throughout the forecast period. Concerns regarding the private sector economy are only likely to be exacerbated by the rise in VAT during January 201 I, which will constrain consumer spending further and ensure that inflation remains consistently above target during the near term. In the medium term, inflation is expected to slow as a consequence of spare capacity, subdued economic growth and interest rates rises in 2011 and 2012, from their historic lows. Although a 'double-dip' recession is not anticipated, risks clearly remain on the downside. Following ￡200 billion quantitative easing over the past 18 months, if economic activity slows considerably, more quantitative easing may be required.