By Jonathan Davies
The UK economy will grow by 2.8% this year, thanks to low inflation and a stronger start to the year in the eurozone, according to economic forecasters EY Item Club.
The report found that low inflation, which has fallen flat, is adding to the economic benefits of fallen unemployment.
The Item Club's forecast is slightly down on the 2.9% it previously predicted - largely due to weaker-than-expected figures in the fourth quarter. It also increased its growth forecast for 2016, up from 2.9% to 3%.
The Club's chief economic adviser Peter Spencer said that financial markets seem prepared for further problems in Greece, but warned that a weak government after the general election and an EU referendum were potential headwinds for growth.
Mr Spencer said: "The economy is taking the general election in its stride as 'noflation' trumps politics. The eurozone recovery is bedding in and completes the positive UK growth picture that we anticipate for 2015 and 2016.
"This is a mirror image of what we saw in 2010-12, when unemployment and inflation were high and Europe was in the doldrums."
He added: "If the strength of the headwinds that held back the economy during the first years of the coalition is anything to go by, the tailwinds enjoyed by a new administration post 7 May should be strong enough to outweigh the effects of any political uncertainty."
The report also forecast rising exports with the EU, rising by 5.9% this year and 4.9% in 2016. Mr Spencer said: "However, it's not all plain sailing and possible risks around a weak government and an EU referendum remain.
"In Europe, the Greek tragedy has yet to reach a denouement, although European banks and investors seem prepared for a disorderly outcome.
"But worries about Ukraine and Russia have eased and we are confident that the UK economy would not falter from any of these shocks."
