LONDON (Reuters) - Britain’s economy is set to pass a landmark on Friday when official data will probably show that it is bigger than it was before the financial crisis struck six years ago.
Gross domestic product is expected to have kept up the same strong pace as in the first three months of the year, expanding by 0.8 percent in the April-June period, according to a Reuters poll of economists.
In annual terms, growth is forecast to have been 3.1 percent, the fastest pace since late 2007.
That will mean that gross domestic product is finally back above levels seen in the first quarter of 2008, when problems in the world’s banking sector were rapidly building into a storm that hammered the global economy.
Britain’s economy largely flat-lined after a 2008-09 recession. But it sprang back to life last year and is set to grow 3.2 percent in 2014, the International Monetary Fund said on Thursday, making it the fastest-growing country in the Group of Seven rich nations.
The pace of the recovery has put the Bank of England on alert that it may have to raise interest rates this year, although its policymakers expect a slight slowing of growth in the rest of 2014 and are worried about weak growth in pay.
“It’s welcome news that the UK economy is starting to move back to normal. With that would come an increase in interest rates,” the Bank’s governor, Mark Carney, said on Wednesday.
“But none of us should forget the extraordinary forces that are still weighing on this economy.”
While economists have predicted that GDP expanded by 0.8 percent in the second quarter, there is a chance it could be weaker after some disappointing industrial output and construction data during the period.
The government, facing national elections in 10 months’ time, is unlikely to draw much attention to the economy getting back to its pre-recession size.
Other countries recovered the output they lost to the crisis much more quickly than Britain. Germany passed that milestone in 2010 and France and the United States followed in 2011.
British GDP per person is only expected to return to pre-crisis levels in 2017, reflecting growth in the population and the country’s stubbornly weak productivity since 2008, according to Britain’s independent budget forecasters.
The protracted nature of Britain’s recovery is partly due to the size of its banking sector, which took a huge hit in the crisis. But critics of the government say it is also because finance minister George Osborne opted for sharp curbs on public spending to rein in the country’s high budget deficit.
Editing by Susan Fenton