Economists increasingly bullish on GDP forecasts

ANOTHER respected economist has joined the growing tally of experts raising their growth forecasts for the coming year, after a raft of improved economic data injected a note of optimism into the City.

Howard Archer, chief European and UK economist at IHS Global Insight, now believes GDP will contract by 3.7 per cent this year and grow 0.5 per cent in 2010.

The predictions are markedly more bullish than at the end of last month, when he expected the economy to contract by around 4 per cent in 2009 and to remain flat overall in 2010.

But Archer warned that sustainable improvement in the economy is some way off at present, due to the continuing obstacles of tight credit conditions and sharply rising unemployment.

“Economic activity is currently benefiting from much-needed inventory correction being largely complete,” he said.

“However, for sustainable recovery to develop there needs to be a clear ongoing improvement in final demand and we are dubious that this will happen for some time to come.”