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UK lagging in terms of economic recovery

The good news according to the Organisation for Economic Co-operation and Development (OECD) is that the global economy is now expected to recover earlier than previously forecast. The bad news is that the UK is not going to be part of it.

 

In fact the OECD now believes that the UK economy will shrink by 4.7% in 2009, which is now worse than their previous forecast of 4.3%. Our own Treasury has predicted a contraction of only 3.5%. By contrast, the OECD believes that the eurozone will grow by 0.3% in the third quarter of this year, whilst the US will grow by 1.6%. Their forecast for the UK is a fall in the third quarter of 1.0% and zero growth in the final quarter.

 

The OECD notes a raft of favourable news which has influenced their more bullish forecast. They point to: falls in the cost of money market funding, although they still hold concerns about the banking system in general; stabilisation in the US and UK housing markets as far as prices and turnover are concerned; lowering of inventories this year is beginning to stabilise and we may see an increase here which will help raise economic growth; and, global trade has reached a low and is ready to accelerate.

China is growing strongly again, but the UK economy will shrink further according to the OECD.

China is growing strongly again, but the UK economy will shrink further according to the OECD.

 

There is also positive news from emerging-market economies, with GDP in China estimated to have risen by over 14% in the second quarter allied to a strong rebound in other Asian emerging-market economies.

 

Is all this complete guesswork? Are things going to be worse than Treasury forecasts? Is it possible that our own dear government could have got things wrong? We will soon know.

 

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Posted in China, economic growth, eurozone, US economy

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