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Double-dip recession unlikely, says leading economist
General News |
24/08/2010
The prospects of the UK slipping in to a double-dip recession are increasingly slim, a leading economist has proclaimed.
In what represents good news for businesses across the UK, and for jobseekers, Andrew Goodwin, senior economic advisor to the Ernst & Young ITEM Club, said it is "unlikely" that a second period of contraction will be witnessed in the UK.
Although he claimed that the one per cent plus expansion witnessed in the second quarter of this year will probably not be matched this year, he poured cold water on suggestions that spending cuts will drag the economy back into negative territory.
"We still see a double dip recession as being unlikely - a maximum probability of 20 per cent," he commented.
Mr Goodwin accepted that some economic growth surveys have slipped a little this month, but said that further external shock would be needed to spark a second recession.
And were the economy to begin to relapse, he suggested that the Bank of England would simply expand its quantitative easing programme, which saw £200 billion invested into the economy up to February this year.
This should not cause inflation and interest rates to rise, Mr Goodwin said, given that the banks are looking to rebuild their balance sheets.
The previous recession, which lasted for six quarters over 2008 and 2009, ended during the final quarter of last year as the UK economy returned to growth.
A 0.1 per cent increase in economic activity was initially reported for October to December 2009, although the Office for National Statistics later made upward revisions to 0.3 per cent and 0.4 per cent.
By the second quarter of this year, analysts were reporting a 1.2 per cent increase in gross domestic product, the fastest rate of expansion witnessed in the UK for three years.
Posted by John Lynes
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