Britain to exit from record recession
Britain will likely discover on Tuesday that its record recession officially ended in the fourth quarter of 2009 but the country’s huge debt pile is set to stunt recovery, economists said.
The Office for National Statistics will publish data widely-expected to show that the economy grew by 0.4 percent during the final three months of last year following six quarters of negative figures.
However, confirmation that Britain is the final major economy to exit recession may not be enough for Prime Minister Gordon Brown to keep his job following a general election due by June.
The economy faces a bleak future with public borrowing forecast to hit a massive 178 billion pounds (203 billion euros, 288 billion dollars) in 2009/10.
Despite a mountain of debt caused by multi-billion-pound bailouts of British banks, Brown on Monday insisted that now was not the time to cut state aid.
“If you withdraw the stimulus too quickly, then you risk a period when you put the recovery at risk. There is no doubt that that’s the view of the rest of the world. It is certainly my view,” Brown told a press conference.
The future for the British and wider global economy is far from rosy, with the International Monetary Fund and the United Nations recently warning of a possible renewed or “double-dip” recession this year.
Those worries have been heightened in Europe, where several nations — notably Greece and Portugal — are struggling to cope with soaring public debt.
“The UK looks to have a weak recovery this year even as it is expected to have exited recession in the fourth quarter,” said Linda Yueh, an expert in economics at Oxford University.
“No current credible plan to reduce the fiscal deficit and the uncertainty associated with an upcoming general election could mean a growing risk premium on debt and the cost of servicing that could in turn dampen growth.
“All in all, a ‘double dip’ is possible or a stagnant quarter in 2010,” Yueh told AFP.
The state of Britain’s troubled economy has become the key battle ground ahead of the general election that is likely to see Brown’s Labour Party defeated by the main opposition Conservatives, according to polls.
Whichever party wins power, Britain faces public spending cuts and taxation hikes in the years ahead as it looks to reduce state borrowing, economists say.
The economy, which is also struggling with high unemployment caused by the financial crisis, contracted for six quarters in a row up until the final quarter of 2009 — its longest recession since records began in 1955.
Finance minister Alistair Darling recently admitted that Britain’s recession would be deeper than thought — with the economy predicted to have shrunk 4.75 percent in 2009 compared with a prior official estimate of 3.5 percent.
The economy is expected to grow by 1.0-1.5 percent in 2010, Darling added.