Forecast Summary

We have assumed a Conservative victory in an autumn General Election and the continuation of policies aimed at a gradual reduction of inflation in the medium term. The outlook for 1987 is for a more broadly‐based expansion of demand and output growth in excess of 3 per cent. This is combined with a large current account deficit and an increase in inflation. But signs are emerging that UK industry is now responding to last year's improvement in competitiveness and the forecast suggests that, over the next four years, the economy should combine non‐oil output growth of 3 per cent with inflation of a similar order of magnitude.