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January 2, 2012 10:33 pm
After two terrible years of forecasting in 2008 and 2009, the predictive powers of economists polled by the FT have improved over the past two years.
In 2011, economists were too optimistic about recovery, but only marginally so. A “strong sense of pessimism” infused last year’s survey and the two leading worries were high inflation reducing incomes and a gathering eurozone sovereign debt crisis. Both of these concerns came true.
The big argument in economics and politics has been whether austerity has been embraced with too much relish by the coalition. Last year, 43 out of 78 economists said the deficit reduciton plan would be on track at the end of 2011 and only 13 called for a plan B.
A year on, deficit reduction in the short-term is broadly on track, but the economists did not foresee the persistent weakness in growth and productivity that has undermined longer-term targets, leading the Office for Budget Responsibility to say two additional years of austerity are needed to repair public finances.
There has been little change in the balance of opinion that the government should stick to plan A, even if it will now take longer.
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