UK economy receives a pessimistic forecast
The UK economy is set to contract by 4.3% this year according to the OECD
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By James Christie. |  |
Wednesday, 24, Jun 2009 01:45
The British economy is set to shrink by 4.3 per cent this year, with no growth predicted for next year.
The Organisation for Economic Co-operation and Development (OECD) has said the economy is likely to stagnate next year, with only mild growth.
However, the organisation has also reported government measures to aid the economy, tax cuts and historically low base interest rates have "cushioned the downturn".
The report states the global downturn is the worst since World War II, but it could have been even more severe.
Jorgen Elmeskov, acting head of economics at the OECD, said: "Activity now looks to be approaching its nadir, following the deepest decline in post-war history.
"The ensuing recovery is likely to be both weak and fragile for some time. And the negative economic and social consequences of the crisis will be long-lasting.
"Yet, it could have been worse. Thanks to a strong economic policy effort an even darker scenario seems to have been avoided. But this is no reason for complacency."
He added green shoots are now showing things are "less bad than they used to be. The world is no longer in freefall".
But Howard Archer, chief UK economist at IHS Global Insight, says the predictions from the OECD are too pessimistic.
"While we continue to have major concerns about the UK economy and expect a bumpy period of economic activity ahead with some quarters of modest contraction and some quarters of modest growth over the next year or so, we believe that the OECD may be being a little too pessimistic in its GDP forecasts for the UK," he said.