The U.K. economy will grow at a slower pace than previously thought during the next two years, fresh forecasts by the European Union’s executive body showed Thursday.
Britain’s gross domestic product–a broad measure of all the goods and services produced in the economy–is set to rise 2.1% in both 2016 and 2017, compared with the 2.4% and 2.2% growth the European Commission was expecting in its November forecast.
U.K. government statisticians revealed last month that the economy expanded 2.2% in 2015, a figure the EU expects will be upgraded to 2.3%. While slower than 2014’s 2.9% growth, it still allowed Britain to be the second top-performing economy in the Group of Seven club of advanced economies, right after the U.S.
Nevertheless, the commission warned once again that Britain’s economic growth remains unbalanced, as robust consumer spending and a strong services sector are partially offset by a slowdown in manufacturing output and weaker trade. Forecasters now see exporters struggling even more than expected back in November, as the outlook for emerging-market economies has worsened.
Meanwhile, weaker-than-expected energy prices are believed to drag year-on-year inflation down to 0.8% in 2016, almost half the rate predicted in November. However, inflation is set to edge up to 1.6% in 2017, in line with earlier expectations, the EU said.
Subdued wages will also help contain price pressure, the report showed, since fresh data has suggested the U.K. labor market still has much room to create jobs. Earlier forecasts showed the unemployment rate hitting a lower bottom at around 5.4% for the next two years, but it has already hit 5.1% and the commission now expects it to go as low as 4.9% by 2017.