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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: zonder who wrote (15233)	11/9/2004 2:13:32 PM
From: mishedlo	Respond to of 116555

Brown paves way for growth downgrades as business frets on regulation Tuesday, November 9, 2004 5:33:08 PM afxpress.com ----by Pan Pylas---- BIRMINGHAM, England (AFX) - Chancellor of the Exchequer Gordon Brown looks set to downgrade his growth forecasts for the UK economy as he cautioned about the prospects of the global economy to a gathering of business leaders In a speech to the Confederation of British Industry's annual conference, Brown echoed concerns of business about the strength of the global economy but stressed that the UK was better insulated than most "All of you are having to cope with the doubling of oil prices, rising commodity prices, uncertainty in the Middle East, large current account imbalances between Europe, Asia and America and the changing values of the dollar, euro and pound," he said Some commentators think that Brown will be forced to downgrade his forecasts for economic growth and revise his budget deficit projections higher in light of these uncertainties Neil Mackinnon, chief economist at ECU Group, said Brown is likely to reduce his forecast for 2005 GDP growth to 2.5-3.0 pct from the current 3.0-3.5 pct prediction when he delivers his pre-budget report, expected to take place early next month "Though he feels the UK is in good shape, he thinks it is resilient but not necessarily insulated," said Mackinnon As a result, analysts think Brown will probably have to tweak his borrowing predictions higher though the Chancellor insisted that the government will meet its so-called fiscal rules in this economic cycle and next and that the upcoming pre-budget report will not be marked by any pre-election giveaway "Britain cannot afford ever again to resort to the old short-termism, whether pre-election short-termism or any other form of short-termism," he said He said the government will stand firm against pressures to link pensions with earnings and will rein back the growth of government spending in the years ahead to bring public finances back onto a more even keel "As we slow the rate of growth of public spending, we will ... continue to meet all our fiscal rules in this cycle and the next," he said Though the government is expected to meet its sustainable investment rule that net debt stays below 40 pct of GDP, there are some doubts about whether it will meet its so-called 'golden rule' of balancing the budget, excluding investment, over the course of the economic cycle, expected to end in 2005/6 Lower than expected tax receipts and a pick-up in government spending in recent years mean the government has little margin for error At the half year stage, the public finances were no better than last year despite the Treasury's projections of a moderate improvement. Over 2004/5, Brown predicted public sector net borrowing of 33 bln stg George Buckley, economist at Deutsche Bank, said Brown may be able to meet his 2004/5 PSNB forecast but may have to push up his projection for the following fiscal year. Buckley is estimating 2005 UK GDP growth of only 2.5 pct, with the economy growing below its long-term trend rate by the year's end, and the global economy growing by 1 percentage point lower than in 2004 "The (PSNB) numbers for 2005/6 stand a greater risk of being revised (than 2004/5) but the risks are certaintly to the downside," he said Elsewhere, Brown echoed business concerns about the weight of regulation and said Britain's presidency of the EU in the second half of next year will be marked by an attack on unnecessary and costly red tape Brown's comments were greeted positively by the CBI's president, who had earlier lambasted the stalled economic reform agenda in Europe John Sunderland urged the European Commission to enact a wide range of policies to make Europe competitive "The vision of Europe becoming the world's most competitive economy remains very much a distant one," he said "Frankly the snail's pace of change is making a mockery of the Lisbon agenda and the drive for economic reform," he will add Once again Brown took a side-swipe at the fiscal regime that governs countries in the EU signed up to the single currency "On fiscal policy generally I can tell you that we will learn from, and not repeat, the mistakes of the European Growth and Stability Pact, with its focus on an annual, not long term, perspective and its concern for short term deficits not long term debt," said Brown The Chancellor also said the granting of independence to the Bank of England has allowed the economy to weather the recent global economic downturn better than it would have done before It has also allowed the economy to cope with the difficulties associated with the doubling in oil prices over recent times He also said the trend towards off-shoring of jobs to other countries, particulary in Asia, was a necessary reminder to business and government to invest more in skills and education, if the UK is going to be able to compete with economies like India and China The trend towards outsourcing was put in stark relief at the start of the conference when the CBI unveiled a survey showing that companies are under increasing pressure to relocate parts of their businesses overseas in order to maintain their profit margins and evade costly regulations. pp/ec For more information and to contact AFX: www.afxnews.com and www.afxpress.com