Britain has been urged to take more forceful measures to salvage its ailing economy which is projected to fall much deeper than predicted.
A leading economic forecaster in London said on Friday that its recent projection remained unchanged -- Britain's GDP would plunge by 4.5 percent in 2009, the largest one-year fall since 1931.
The Centre for Economics and Business Research (CEBR) confirmed its gloomy assessment of the prospects for the British economy, following the release of GDP growth figures by the Office for National Statistics (ONS) on the same day.
"Today's GDP release (by the ONS) showing a 1.9 percent contraction for the first quarter of this year, along with the plethora of economic data released this week, has not changed this view," the CEBR said in a report.
Several other business analysts have suggested a similar shrinkage in the British economy, ranging from 4 to 4.5 percent. The International Monetary Fund (IMF) also predicted that Britain could see a 4.1 percent decline.
All these projections are in sharp contrast to the figures given by British Chancellor of the Exchequer Alistair Darling in his 2009 budget which showed that the GDP would shrink by only 3.5percent.
In response, many opposition members of parliament have called the government's predictions "wildly optimistic."
Sceptical about Darling's borrowing forecasts of 175 billion pounds (253 billion U.S. dollars) in 2009, the CEBR said the chancellor based his figures on a 3.5 percent contraction in the economy. Instead, the CEBR suggested that the true figure would beat least 190 billion pounds (275 billion dollars).
The figures will further anger the opposition parties, which have accused the government of being "frivolous" with public spending.
According to the CEBR's predictions, Britain will see an overall investment fall by 18.9 percent in 2009. The overall employment would fall by 3.6 percent in 2009 and a further 1.9 percent in 2010.
Britain's unemployment now stands at nearly 2 million and many predict it could reach 3 million by the end of 2009.
The IMF forecast a rise in the number of unemployed, saying 7 percent of Britain's workforce would be out of work by the end of 2009 and that by the end of 2010 the number would hit 9 percent.
MORE POWERFUL MEASURES NEEDED
Commenting on the preliminary GDP figures for the first quarter published by the ONS, David Kern, chief economist at the British Chambers of Commerce (BCC) said: "This decline is much worse than expected and shows that the downturn is more severe than most analysts thought."
The fall in activity across all sectors indicates that the measures adopted so far to fight the recession have not been enough. The bleak outlook prompted the BCC chief economist to say the government needs to do more.
"Support announced in the budget will have to be supplemented by more aggressive steps to prevent the loss of jobs, and the Bank of England will have to apply quantitative easing more forcefully," Kern said.
"With RPI inflation in negative territory, fears of inflation must be set aside until the deepening recession is curbed," he added.
DECLINE TO MODERATE
The Confederation of British Industry (CBI) was among those to report grim news. Its latest quarterly Industrial Trends survey has revealed that the demand for British manufactured goods slumped at its fastest rate in 30 years in the past three months as output has seen a record decline.
There was a dramatic rise in the number of manufacturers who are concerned about access to credit or finance limiting their output in the next three months.
"The first quarter of 2009 was extremely tough for UK manufacturers," said the CBI's Chief Economic Adviser Ian McCafferty. But he suggested the worst may be behind them with the pace of decline slowing slightly.
According to the survey, firms have run down their stocks more sharply this quarter as demand and output have collapsed, but stock levels are still considered too high. Job losses have been steep and training and investment plans have scaled back significantly.
"However, firms are hopeful that the pace of decline in manufacturing activity will moderate slightly in the next three months, and general sentiment is falling less rapidly for the first time in seven quarters," McCafferty said.
"While general business sentiment continued to fall this quarter, it did so at a considerably slower rate than in the previous quarter, and this was the first time in 21 months that the rate of decline has slowed," he added.
(Xinhua News Agency April 26, 2009) |