OECD warns of UK recession and unemployment
The Organisation for Economic Cooperation and Development (OECD) has cut its global growth forecast for next year to 3.4 per cent and has warned that the UK will follow Europe into recession.
The organisation also predicts that unemployment in the UK will reach 9.1 per cent by 2013.
Yesterday the Ernst & Young ITEM Club, a non-governmental economic forecasting group, also revealed UK unemployment estimates, with its figures suggesting that it could reach 9 per cent as early as next year.
The OECD expects the eurozone economy to shrink by 1 per cent in the fourth quarter of 2011 and by 0.4% in the first quarter of 2012, while in the UK a contraction of 0.03% is expected for the fourth quarter following by a further contraction of 0.15% next year.
The OECD also warned that an event such as Italy or Spain defaulting on their debts could trigger a global contraction.
There are rumours that the International Monetary Fund is preparing to offer Italy a bailout, but these have not been confirmed.
In the absence of a major negative event, the OECD expects the eurozone to grow 0.2 per cent in 2012 following a shallow recession from September 2011 to March 2012, while the UK’s economy is expected to grow 0.5 per cent next year.
Amid the gloomy predictions by the OECD, ratings agency Moddy’s warned that even strong economies such as Germany may have to have their credit status revised.
Germany, France and Britain have retained their triple-A credit rating while Italy, Spain, Greece, Ireland and Portugal have all had their ratings downgraded, causing their borrowing costs to soar.
In the UK, the Chancellor is due to make his Autumn Statement on the economy this week, and Labour is calling for the government to slow down the rate of cuts in order to boost jobs and growth.
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