Friday 19 January 2018

Britain escapes recession in the final quarter of 2009

Brendan Keenan

Brendan Keenan

THE British economy finally emerged from recession in the last three months of 2009, according to official figures -- but only just.

Output of goods and services as measured by gross domestic product (GDP) rose by just one-10th of 1pc from the previous quarter, Britain's Office for National Statistics said.

This brought to an end six consecutive quarters of economic shrinkage, the longest on record.

Recession is usually defined as economic contraction in two consecutive quarters.

The recession reduced Britain's GDP by 6pc, the statistics office said. The economy shrank 4.8pc in 2009, the biggest annual drop since records began in 1949.

The recovery in the last quarter is so small as to be almost technical and it could yet be revised away by the statisticians. But it means Britain now joins the other G-7 group of large economies in returning to growth.

Separately, the International Monetary Fund (IMF) significantly increased its growth forecasts for the world economy in 2010, saying the recovery from the global financial crisis had been stronger than expected.

IMF update

In the latest update of its World Economic Outlook, the IMF predicted strong global growth of 3.9pc this year, well up from its October projection of 3.1pc. It expects further improvement in 2011, with world economic activity expanding by 4.3pc.

However, the IMF said that, while recovery was stronger than it had anticipated earlier, "it is proceeding at different speeds in the various regions" and that the highest growth was in the emerging economies.

It said: "The rebound in most advanced economies is likely to remain weak, with high unemployment rates and rising public debt posing challenges to policymakers."

The IMF warned that heavy government borrowing could, at a minimum, crowd out private-sector credit growth, gradually raising interest rates for private borrowers and putting a drag on the economic recovery.

"This could occur as private demand for credit recovers and as banks are still constrained in their ability to extend credit."

An even more serious risk was a rapid increase in interest rates on government public debt, which could have negative effects on a wide variety of financial institutions and on the economic recovery.

The IMF added: "Finally, there is the risk of a substantial loss in investor confidence in some sovereign (government) issuers, with negative implications for economic growth and credit performance in the affected countries."

Irish Independent

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