OECD: UK recovery to be ‘weak and fragile’

| June 24, 2009 | 0 Comments

The Organisation for Economic Cooperation and Development (OECD) is forecasting that the UK’s recession will end in this year but said recovery is likely to be “weak and fragile” for some time.

The OECD is forecasting that output will decline by 4.3% this year, revised upwards from its March forecast of a 3.7% fall.

The organisation, which represents the 30 most industrialised nations, said the UK is in “a sharp recession” and is forecasting zero growth for next year, while the UK budget deficit will hit 14% next year.

Both predictions are worse than those estimated by the UK Government. Chancellor Alistair Darling was much more optimistic with his estimation that output will grow by at least 1%.

However, the OECD did highlight that the pace of the global downturn is now moderating but is still forecasting that world output will contract by 2.2% this year.

The OECD said: “It looks like the worst scenario has been avoided. “Even if the subsequent recovery may be slow, such an outcome is a major achievement of economic policy.”

The body also remarked that signs of recovery are being seen in the large non-OECD countries such as China, while activity in the US could bottom out in the latter half of the year.

However, the outlook is not so positive for the euro zone. The group said “signs of impending recovery in the euro area are not yet clearly visible”, this is primarily due to export setbacks and damage to the financial sector.

Unemployment in the euro zone, the UK and the US could exceed 10%, according to the OECD. The unemployment rate in the UK currently stands at 7.2%.

The OECD’s gloomy outlook will come as a major setback since recent reports have been giving positive assessments that the UK’s recession may, in fact, have ended.

The influential think tank, the National Institute of Economic and Social Research (NIESR), recently said the UK’s economy grew in May by 0.1% and follows a similar rise in the previous month and was the first growth in a year.

Martin Weale, director of NIESR, said that he expected the next set of official GDP figures to show “either that the recession is over or that it is close to over”.

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