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EU raises UK growth forecast

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Staff writer ▼ | February 26, 2014
LondonThe European Commission raised its forecast for growth in the British economy Tuesday but lowered its forecast for net exports, warning that the economy is unlikely to be weaned off its dependence on consumer spending for some time.

The forecast from the European Union's executive arm is the latest to highlight the unbalanced nature of the U.K.'s economic recovery, which was one of the fastest among developed nations in 2013.

British officials say they want exports and business investment to rise alongside consumer spending in order to be confident the recovery is sustainable but net exports are unlikely to contribute materially to growth for the next two years, the commission said. Three months ago, it predicted they would make a modest contribution.

"Growth is likely to continue to come almost exclusively from domestic demand," the commission said. It predicted the U.K. economy will grow 2.5% this year, up from a forecast it made in the autumn for 2.2% growth. The economy grew 1.9% in 2013. In 2015 the economy should grow 2.4%, the commission said.

The commission said business investment should pick up this year and next, based on evidence from business surveys. The commission's 2014 growth forecast is broadly in line with those of the International Monetary Fund and the British government's independent forecaster, the Office for Budget Responsibility. Both anticipate growth of 2.4%.

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