Tags: UK | Recession | united | kingdom

UK to Fall Into Recession This Year, Academic Organization Warns

Monday, 06 February 2012 08:02 AM

The United Kingdom will slide into a recession this year, with the economy contracting by 0.1 percent, according to National Institute for Economic and Social Research, an academic organization.

The United Kingdom stands a one-in-four chance of avoiding a recession as measured by its classic definition, which is two consecutive quarters of contracting economic growth.

Growth will return in 2013, with gross domestic product rebounding by 2.3 percent, the institute finds, as reported by the Financial Times.

The government shouldn't be too hasty to embrace austerity measures such as spending on infrastructure, as the economy needs as much activity as it can get, while easing up on tax hikes still won't threaten the country's deficit targets.

"Infrastructure needs doing," says institute director Jonathan Portes, the Times adds.

Exposure to the crisis-ridden eurozone is threatening growth and investment.

Meanwhile another respected organization has said the government should consider easing up on its austerity plans to foster more growth.

Institute of Fiscal Studies (IFS) says London cut taxes, even on a temporary basis, without worrying that the Bank of England would raise rates in response.

Tax cuts should only be temporary, however, as the government is correct to fret over public finances.

"The chancellor faces his third budget with the economy and public finances in considerably weaker shape than he had hoped a year ago," says IFS Director Paul Johnson, according to the BBC.

The U.K. government has insisted it would sticks with plans to cut deficits even if such measures hamper growth rates.

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Monday, 06 February 2012 08:02 AM
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