The Confederation of British Industry (CBI) today scaled back its 2003 UK GDP growth forecast to show a 2.1pc rise from its previous estimate of 2.2pc due to weak global demand. However, the CBI raised its 2004 GDP forecast to 2.5pc from 2.4 previously, due to sterling's decline. Despite the upgrade, the CBI's estimate for 2004 is still below that used by the Treasury to project the public finances. As a result, the CBI expects public sector net borrowing to rise to STG27.3bn in 2003/4 and STG32.3bn in 2004/5, compared with government forecasts of STG27bn and STG24bn respectively.
With GDP growing below-trend for a third year running, unemployment is expected to rise from around 1.46 million at the end of 2002 to 1.6 million at the end of this year, before falling again in 2004. Employment will remain broadly flat as public sector recruitment will offset private sector job losses, CBI said. Sterling's recent decline is not expected to pose any significant inflationary problems as spare capacity in the UK and around the globe acts to keep price pressures at bay. //www.fxcentre.com