31 out of 32 economists surveyed by Bloomberg think that the UK will see growth, Goldman Sachs has come out and said buy sterling over the Euro and Britain’s GDP is expected to have grown by 0.4% in 2010 quarter one. But the UK still has record borrowing.
Although Â£3 billion short of Alistair Darling’s forecast, UK borrowing still hit Â£23.5 billion in March, which is the highest March figure since records started.
This puts the March to March total using the government’s preferred measure at about Â£163.4 billion, another record high even though Â£3.1 billion short of the forecasted figure, with the grand total standing at Â£890 billion, which equates to an eye-watering 62% of GDP. The government currently expects this figure to keep rising until at least 2014-15 to about 75% of GDP.
Any borrowing undershoot was put down to reduced local authority expenditure. This though is modest and the overall figure still shows what dire straits the public sector finances are in.
The government has said it will halve the deficit (the rate at which debt increases) within 4 years, but most commentators believe this to be based on a far too optimistic view of the UK economy going forward. The government forecast growth of 3.25% next year, whilst the City expects just 2% meaning the City expects tax receipts will be lower than the Chancellor thinks.
At least the UK is still hanging on to its prime credit rating, unlike Greece, which has suffered as Moody’s cut its rating from ‘A2’ to ‘A3’. With the warning of more drops to come (Wiki – A1, A2, A3: Moody judges obligations rated A as "upper-medium grade", subject to "low credit risk", but that have elements "present that suggest a susceptibility to impairment over the long term".)
Spreads on Greek 10 year bonds are now some 600 points above the German Bunds with their yields now above 9%. Moody’s believes that Greece will, in the end, need more than the â‚¬45 billion put aside by the EU and IMF to help bail them out.