Friday, 27 April 2012

Fragile British economy enters double-dip recession

LONDON, April 25 (Xinhua) -- Britain's economy has fallen into double-dip recession after official figures showed its economy shrank in the first quarter this year.

The Office for National Statistics (ONS) said Britain's gross domestic product (GDP) contracted 0.2 percent in the first three months 2012, meaning the country has slipped back into recession.

Technically, a recession occurs after two consecutive quarters of negative growth. The ONS figures said Britain's GDP in the last quarter of 2011 dropped by 0.3 percent. Britain last experienced recession in 2009.

A HEAVY BLOW

The worse-than-expected economic growth figure has dealt a heavy blow for the ruling coalition led by Prime Minister David Cameron.

The prime minister and Finance Minister George Osborne were "very disappointed" at the figures.

Cameron said: "I don't seek to excuse them. I don't see to try to explain them away. There is no complacency at all in this government in dealing with what is a very tough situation that frankly has just got tougher."

Osborne in his March budget forecast growth of 0.8 percent this year and 2 percent next year. In 2014, 2.7 percent was forecast, followed by 3 percent growth the following years.

The current 0.2 percent contraction in GDP is bad for the coalition government as it desperately seek to grow the economy and eliminate the country's large budget deficit over the next five years.

The government is set to unveil new measures to further limit public spending as part of the government's efforts to meet its austerity targets. Under the new rules, government departments will have to set aside 5 percent of their annual budget to cover unexpected expenses in a bid to discourage them from asking for more money from the central government when emergencies arise.

Osborne said: "It's a very tough situation when you're recovering from these enormous debts that Britain built up in the good years."


Cameron added it was "painstaking, difficult" work, but the government world stick with its plans and do "everything we can" to generate growth.

Labor party leader Ed Milliband said the figures were catastrophic, blaming the government's economic policies for landing the country back in recession.

A GLOOMY OUTLOOK

The latest data from the ONS is consistent with a report released by the OECD predicting the British economy would shrink in the first quarter of 2012, taking it back into recession.

Meanwhile, economists and research institutes have warned that Britain's economy will continue to struggle with factors such as high inflation, rising unemployment and uncertainty in its exports market, which is strongly affected by eurozone debt.

According to the ONS, the recession was mainly driven by a sharp fall in construction sector, which contracted 3 percent and 0.2 percent in the last two quarters. At the same time, the manufacturing sector failed to return to growth.

The services sector, which accounts for a third of the economy, grew only 0.1 percent in the first quarter this year, after a decline of 0.1 percent in the previous quarter.

Production industries output also declined 0.4 percent in the first quarter of this year, and 1.3 percent in the previous quarter.

The latest report issued by the Ernst & Young Item Club said Britain's jobless rate is forecast to rise to 9.3 percent in the middle of next year from the current 8.4 percent, with the number of those seeking work rising to almost 3 million.

Britain's Consumer Price Index (CPI), a major gauge for inflation, will reach 2.8 percent this year and drop to 2.1 percent next year.

The country's consumer spending power continued to deteriorate in March, dropping by 1.1 percent compared to a year earlier, reaching the lowest level since February 2011. - 
Xinhua