It is time for our annual look ahead to the next year – and time for careful reflection over how we got on last year. We got quite a lot of our forecasts right, but by no means all,” the CEBR said. “We were delighted our forecast that the Olympics would be a failure was wrong (though we were technically correct to say parts of London’s economy lost out because of the crowding out of traditional tourism).

We were right on the US economy being the Western leader, the euro recession, the UK recession, the Asian slowdown, the squeeze on UK household incomes despite falling inflation and the unexpected success of the Diamond Jubilee.

Our GDP forecast will probably be slightly off but we should be in the top 3 (in January 2012 we forecast the UK economy would contract by 0.4% ; the latest consensus is –0.1%). We could yet be top of the class for forecasting UK GDP for the second year in a row if the ONS gives a weak figure for Q4…. We were wrong on the euro for 2012 – it tottered but stood up. No country left and as a result the scale of the bailout of European banks was much less than we feared.

However, the euro crisis is still unresolved and many questions still remain about the sustainability of the single currency area given the divergences in fundamentals across member countries. Therefore, the euro still remains the biggest known unknown for both the global economy.

“Recession in the eurozone also remains a major challenge for the UK economy, given that it is heavily dependent on export growth in the post-financial crisis environment.

Our infamous sporting predictions were mixed. We were right on the Premiership till two minutes from the end of the season, on Wales winning the 6 Nations, on England beating the West Indies at cricket and on Spain winning the European Nations Cup. We were wrong in that South Africa beat England at cricket fairly easily in the end against our prediction of a tight England victory.

Here are our top ten predictions for 2013:

1. This could be the year when the splits between the UK and the other EU member states turn into something politically serious. It looks like a marriage where love has gone and they are starting to try to sleep on the far sides of the bed. Oddly, rather than the other way round, it could be that the prospect of UK exit triggers the euro breakup.

2. Asia could bounce back a bit after the world’s main growth machine of recent times spluttered in 2012. Since the political succession was sorted out in China, they have been pushing the levers in favour of economic growth. Structural and long term problems remain but these may be overtaken in 2013 by extra demand from China. And Japan with a new aggressive government is likely to try reflation before anything else.

3. Despite brinkmanship, the US reaches a deal on deficit reduction after stopping the clocks to meet the deadline. Congress and the White House agree to cut the deficit by about 1% per annum. Split 1/3rd tax rises, 2/3rds spending cuts.

4. The UK will probably have negative growth in Q4 2012 and there must be a chance of a weak Q1 2013 as well, although data from the ICAEW Grant Thornton Business Confidence Monitor and FSB Small Business Index have been encouraging enough to suppose there are cautious grounds for optimism going into 2013. So we give a 50-50 chance on a triple dip.

5. Inflation will remain above the Bank of England’s 2.0% target throughout 2013 as utility price rises feed through.

This article continues…

6. The UK’s labour market will continue to respond flexibly to the economic environment; the underemployed rather than pervasively unemployed workforce will experience another year of very slow pay growth, with average pay growth again failing to surpass the 2.0% mark.

7. With personal allowances rising, overall real household disposable incomes will rise slightly in 2013, but probably not enough to offset the increase in the number of households, so per capita real incomes will be about flat as the on-going squeeze on households continues.

8. The new Governor of the Bank of England, Mark Carney, will use his powerful first six months to reformat monetary policy and to negotiate a truce on bankerbashing. Despite this, the year for the City will be less bad than 2012 but bonuses early in the year will be much in line with those in other businesses and salaries will edge down closer to reality. The ‘flat white economy’ of internet and media businesses will have another bumper year of business.

9. The Funding for Lending scheme should start to have a more positive effect on the real economy; we should see mortgage lending volumes starting to pick up, but we expect only a marginal increase in house prices across the UK and the disparities across the country are bound to persist with London and the South East’s housing shortage serving to push up prices but weaker parts of the UK economy such as Northern Ireland suffering continued declines.

10. After the incredible summer of sport in 2012, with Bradley Wiggins, Rory McIlroy and Andy Murray adding to the lustre of the Olympic and Paralympic athletes, 2013 may seem tame. But there should be a fascinating Ashes series. The result will probably depend on whose players are fit enough to play but the odds are slightly in favour of England. France looks an odds on bet for the 6 nations. Manchester United ought to win the Premiership.

Obviously, against this background it would be stretching things a bit to wish people a prosperous New Year. But the last two years have shown that people can find means to happiness with only moderate prosperity. So our new year wishes are for happiness, whether people are prosperous or not. Clearly both would be preferable, but the former is much more important.