Government ‘optimistic’ on UK outlook

Sep 3 2008 by Peter McCusker, The Journal

THE Government remains optimistic the UK will avoid recession despite such a prediction from a leading think-tank.

The Paris-based Organisation for Economic Co-operation and Development (OECD) predicted that the UK economy will shrink 0.3% in the third quarter, and by 0.4% in the fourth.

The OECD says Britain will fare the worst among the G7 group of seven leading industrialised nations, which comprise the UK, US, Japan, Germany, France, Italy and Canada, with the other economies all slowing to a standstill at worst during the rest of this year.

The US will see growth slow to 0.9% in the third quarter and 0.7% in the fourth. Europe’s biggest economy, Germany, will come to a standstill in the third quarter, the OECD said, and edge ahead just 0.1% in the fourth.

There have been a series of gloomy economic forecasts about the UK economy in recent months.

Bank of England Governor Mervyn King said last month that the country would experience at least one quarter of negative growth in the coming year, while the British Chambers of Commerce has explicitly warned that Britain’s economy will enter a recession within the com ing year. Prime Minister Gordon Brown’s spokesman told a regular daily briefing of reporters in Westminster yesterday: “The Treasury will give its updated forecast at the time of the Pre-Budget Report.

“Clearly these are challenging times for all economies, but the fundamentals of the economy remain sound and the economy remains resilient.”

Chancellor Alistair Darling, who at the weekend said the economy was facing its toughest ride for 60 years, said he remained “optimistic” about Britain’s economic prospects, despite the international challenges of the credit crunch and high oil prices.

Mr Darling told BBC Radio 4’s World at One: “We have these twin shocks, along with every other country in the world.

“But I remain optimistic that we will get through it because I believe the fundamentals – for example we have got high levels of employment, we have got historically low interest rates and historically low inflation compared to the 1980s and early 1990s – will stand us in good stead, provided we support the economy, as we are doing, to get through this tough period. Yes, these are profound shocks, but yes I am optimistic we will get through it.” The definition of a recession is two successive quarters of negative growth. According to official UK data released last month, the economy came to a standstill during the second quarter of 2008.