The governments fantasy projections on the economy made by their Office for Economic Propaganda (OBR) shortly following the Conservatives May 2015 election victory are fast unraveling as the OBR's latest propaganda nudged expected growth for 2016 lower to 2% from 2.4%, and growth for 2017 lower to 2.2% from 2.5%, whilst maintaining more distant year overly optimistic forecasts.

However, as per my recent analysis of the UK economy that despite today's revision lower, OBR GDP expecyatopms still have a lot further to fall before they come anywhere near to that which is likely to be most probable:

06 Feb 2016 - UK Interest Rates, Economy GDP Forecasts 2016 and 2017 )

UK Economy

The oil price collapse has triggered a huge transfer of wealth from England to Scotland to prevent a collapse of the Scottish economy following what will probably turn out to be the slow death of the North Sea oil industry which requires an oil price of approx $60 just to break even let alone the likes of $100+ to finance new expensive operations that the fantasy land Scottish Nationalists had propagandised during the 2014 Independence Referendum and delusionally continue to cling onto to this day when the truth is that Scotland's oil party is well and truly over!

Nevertheless the support for Scotland, a weak european economy and evaporating Chinese demand are all acting to drag down UK GDP to imminently a sub 2% rate. However, whilst a recession does not appear to be on the cards the slowdown in momentum is such that the UK looks set to dip to an annualised growth rate of below 1.5% and may even touch bottom at 1% which compares against the engineered mini-election boom of 2.8% in the run upto the May 2015 general election.

Therefore, as usually tends to be the case for post election economic slowdowns, then the next 2 years are likely to be weak (2016, 2017) with GDP probably going to average at a rate of about 1.6% for each year which compares against the Bank of England's economic propaganda expectations of 2.5% for 2016 and 2.7% for 2017.

Whilst the OBR's growth forecasts have today been revised lower to :

2016 : 2.0% from 2.4
2017 : 2.2% from 2.5
2018 : 2.1% from 2.4
2019 : 2.1% from 2.4
2020 : 2.1% from 2.3

Therefore expect further revisions lower towards my forecast of 1.6% for 2016 and 2017, the consequences of which will be for far higher borrowing that will literally blow apart the Conservative governments fantasy expectations for a £10 billion budget surplus for 2020-21, which is just not going to happen as I earlier covered in UK Government Debt Propaganda Continues as OBR Revises Borrowing Higher,. (17 Mar 2016) as illustrated by the below graph.

For more on the UK economy and prospects for interest rates for over the next 2 years then see my recent in-depth analysis and accompanying video:

https://youtu.be/75y5aLczdy0

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By Nadeem Walayat

http://www.marketoracle.co.uk

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

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Comments

R.E.B
17 Mar 16, 21:44

Real UK GDP?

What is the UK's real GDP? We all know that the way GDP is calculated is a joke. The biggest laugh of all came last year when the government announced they were including the illicit drug trade and the sex industry in GDP numbers. So while the statisticians sit around trying to guess how many wraps of smack changed hands last quarter or how many ladies of the night did X amount of business, something totally different happens in the real world. Also lets take out unproductive government spending too. So our debt to GDP ratio is probably sky high, but that only serves to reinforce your basic point that printing money is the only answer they have.

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