In association with

Economic forecasts don't get any better

Feb 16 2009 by Andrew Mernin, The Journal

THE rapidly-deteriorating global economy and the continued difficulties UK businesses are facing in accessing credit will push the economy deeper into recession later this year, according to the CBI.

The gloomy forecast from the CBI follows the International Monetary Fund’s revised prediction for a sharp downturn in the global economy last month and other data which has dashed hopes that growth in the emerging markets will soften the impact of the global economic crisis.

The business group predicts the recession, which began in the third quarter of 2008, to last throughout 2009.

The economy is expected to contract by 3.3% and unemployment will reach close to 2.9 million by the end of the year.

After six quarters of negative growth, the economy is expected to stabilise early next year with the recovery building throughout 2010.

Sarah Green, regional director of CBI North East said: “Faced with a global confidence crisis, a rapid fall in demand and credit constraints, UK firms have been forced to scale back investment and cut jobs.

“The outlook remains extremely uncertain so forecasting remains especially difficult.

“Ultimately the severity of this recession will depend on the speedy implementation of the Government’s measures to unblock the credit markets and the success of various global stimuli packages in repairing business and consumer confidence.

The CBI believes the economy will contract by a cumulative 4.5% over the six quarters of negative growth while GDP growth for 2009 has been revised down from -1.7% in November to -3.3%.

As the recession deepens, unemployment is expected to rise sharply over the course of 2009 and the CBI predicts the number of people out of work to peak at just over three million in the second quarter of 2010.

Ms Green said: “Given the rapid contraction in global economic activity, and the continuing credit squeeze, we believe the UK will be mired in a deep recession for the whole of 2009, lasting six quarters in total.”