Government predictions are for the UK economy to shrink by 3.5% in 2009 and recover slowly in 2010 registering an increase of 1.25%

The economic destabilisation caused by the credit crunch has had a devastating effect upon the global economy, with particularly severe consequences for export-orientated economies as consumer demand fell due to the limitation of credit, unemployment increased and the financial sector tipped the real economy into recession.

Though the trend of these events could be forecast, the scale has taken many by surprise.

Government predictions are for the UK economy to shrink by 3.5% in 2009 and recover slowly in 2010 registering an increase of 1.25%, before resuming above trend growth in 2011 with a 3.5% increase in activity.

Other forecasters are more cautious. The British Chamber of Commerce predict -3.8% in 2009 and +0.6% in 2010, whilst the CBI suggest growth rates of -3.0% in 2009 and +0.7% in 2010. These estimates
are close to the consensus of a panel of economists, whose predictions are -3.7 and +0.7 accordingly.

Therefore, the broad view seems to be that the economy will begin to recover in Spring 2010 and produce a modest net rate of growth by the end of that year.

Author: Phil Whyman, Professor of Economics at the University of Central Lancashire

Read more: http://www.fpb.org/hottips/440/Mid_year_economic_forecast.htm

Source: Forum for Private Business - www.fpb.org

www.ukba.co.uk