CBI says recession has hit rock bottom
The CBI said today that the worst of the recession is over since it took a deeper grasp than expected in the first quarter of 2009. However, the expectation is that the economy will slow more gently in the second part of the year.
The group was keen to stress that despite the worst being over, the recovery period will still be slow and protracted as the UK economy is still fragile and GDP growth is not expected until the beginning of the second quarter of 2010.
Within 2009, the economy is expected to shrink by 3.9 percent which is far worse than the 3.3 percent that was forecast in February. This is due to the tougher than expected start but recently there have been a few small signs that the economy is turning the corner.
The CBI director general, Richard Lambert, said that a combination of the banking packages, aggressive monetary policy and fiscal support has meant that the decline in the economy is being halted.
The impending budget will be a big indicator on the rest of 2009, as the fall in tax revenues in a shrinking economy, coupled with increasing if not spiralling government debt means the chancellor must be prudent, yet forward looking.
It is hoped that the budget will focus on job creation and investment, as well as efficiency savings within public services.
The thoughts of the CBI echo those of the Ernst & Young Item Club, who said over the weekend that the economy is no longer in freefall and believes the UK economy will shrink by 3.5% in 2009, but by just 0.1% in 2010, as credit conditions ease and markets stabilise.
The Ernst & Yong Item Club also said that any recovery will be “slow and fragile.”