In face of the first and worse recession since 1991, Britain has been urged to stand firm to fend off any further slump, and dig its economy out of the downturn with more powerful measures.
Britain has officially fallen into recession after having undergone negative economic growth over the second half of 2008. The confirmation of recession in the country came on Friday as figures showed its GDP fell by 1.5 percent in the final quarter of 2008, following a 0.6 percent drop in the third quarter.
The Office of National Statistics said that the increased rate of decline in GDP resulted mainly from weaker services and production industries output.
Services output weakened by 0.5 percent and 1.0 percent, respectively, in the third and fourth quarter of last year. Meanwhile, the decline in total production was 1.4 percent and 3.9 percent over the two quarters. Manufacturing output made the largest contribution to the slowdown, falling by 4.6 percent in the fourth quarter, compared with a 1.6 percent decrease in the previous quarter.
"These numbers are much worse than expected and this is the sharpest contraction in the economy since 1980," said John Cridland, deputy director-general of the Confederation of British Industry.
"The intensity and speed of falling demand combined with the global credit crunch mean this recession is going to be more painful than the early nineties, and sadly one consequence of this will be much higher unemployment."
Cridland expressed hope that the impact of interest rate cuts, falling inflation, the fiscal stimulus, and the government's recent measures to kick-start lending will have a stabilising effect later this year.
His view was shared by David Kern, economic adviser to the British Chambers of Commerce.
He said the sharp decline in GDP also makes it critical for the country to persevere with forceful and corrective measures, while expressing hope that the huge stimulus package that the new U.S. administration plans to introduce could have beneficial global consequences.
In October 2008, Kern called the British policy makers to focus on alleviating the worst consequences of the downturn. At the same time, he urged not to exaggerate the gloom, saying Britain was not in a severe slump and could still avoid the worst.
However, Britain has been battered more severely than expected. The country has been warned of seeing a decline of 2.4 percent in GDP for 2009.
"While the short-term outlook is dire, it is important not to drift into excessive despondency. The government and MPC (the Monetary Policy Committee of the Bank of England) still have important weapons at their disposal, which they will undoubtedly deploy, " Kern added.
Brendan Barber, the Trades Union Congress general secretary, echoes the views of David Kern, saying "This recession is not bad luck or an inevitable swing of the pendulum."
"Its cause is irresponsible behaviour by banks and financial institutions taking advantage of the deregulation started by Mrs Thatcher and President Reagan, and continued to a greater or lesser extent ever since, " Barber added.
Barber also urged the British government to strain every sinew to make the recession "as short and shallow as possible", meanwhile to set up a tough public inquiry into what went wrong and why.
The spill over of the U. S. financial crisis has taken its toll of economies across the world. Over the last few weeks, the global economic crisis has intensified, resulting in more companies falling into trouble, declining production and rising job cuts.
Britain is among the few EU countries most affected by the global downturn. In order to stimulate the economy, Britain has introduced many measures, from interest rates and VAT cuts, job rescue plans to two banking bailout packages.
However, many have suggested that the country should adopt a range of more effective and brave measures, such as cutting the interest rates to zero, to support lending, help businesses and protect jobs.
Obviously, Britain is facing a tough test to prevent its economy sliding deeper into recession and avoiding further collapse.
Copyright Dongying Wang
Britain has officially fallen into recession after having undergone negative economic growth over the second half of 2008. The confirmation of recession in the country came on Friday as figures showed its GDP fell by 1.5 percent in the final quarter of 2008, following a 0.6 percent drop in the third quarter.
The Office of National Statistics said that the increased rate of decline in GDP resulted mainly from weaker services and production industries output.
Services output weakened by 0.5 percent and 1.0 percent, respectively, in the third and fourth quarter of last year. Meanwhile, the decline in total production was 1.4 percent and 3.9 percent over the two quarters. Manufacturing output made the largest contribution to the slowdown, falling by 4.6 percent in the fourth quarter, compared with a 1.6 percent decrease in the previous quarter.
"These numbers are much worse than expected and this is the sharpest contraction in the economy since 1980," said John Cridland, deputy director-general of the Confederation of British Industry.
"The intensity and speed of falling demand combined with the global credit crunch mean this recession is going to be more painful than the early nineties, and sadly one consequence of this will be much higher unemployment."
Cridland expressed hope that the impact of interest rate cuts, falling inflation, the fiscal stimulus, and the government's recent measures to kick-start lending will have a stabilising effect later this year.
His view was shared by David Kern, economic adviser to the British Chambers of Commerce.
He said the sharp decline in GDP also makes it critical for the country to persevere with forceful and corrective measures, while expressing hope that the huge stimulus package that the new U.S. administration plans to introduce could have beneficial global consequences.
In October 2008, Kern called the British policy makers to focus on alleviating the worst consequences of the downturn. At the same time, he urged not to exaggerate the gloom, saying Britain was not in a severe slump and could still avoid the worst.
However, Britain has been battered more severely than expected. The country has been warned of seeing a decline of 2.4 percent in GDP for 2009.
"While the short-term outlook is dire, it is important not to drift into excessive despondency. The government and MPC (the Monetary Policy Committee of the Bank of England) still have important weapons at their disposal, which they will undoubtedly deploy, " Kern added.
Brendan Barber, the Trades Union Congress general secretary, echoes the views of David Kern, saying "This recession is not bad luck or an inevitable swing of the pendulum."
"Its cause is irresponsible behaviour by banks and financial institutions taking advantage of the deregulation started by Mrs Thatcher and President Reagan, and continued to a greater or lesser extent ever since, " Barber added.
Barber also urged the British government to strain every sinew to make the recession "as short and shallow as possible", meanwhile to set up a tough public inquiry into what went wrong and why.
The spill over of the U. S. financial crisis has taken its toll of economies across the world. Over the last few weeks, the global economic crisis has intensified, resulting in more companies falling into trouble, declining production and rising job cuts.
Britain is among the few EU countries most affected by the global downturn. In order to stimulate the economy, Britain has introduced many measures, from interest rates and VAT cuts, job rescue plans to two banking bailout packages.
However, many have suggested that the country should adopt a range of more effective and brave measures, such as cutting the interest rates to zero, to support lending, help businesses and protect jobs.
Obviously, Britain is facing a tough test to prevent its economy sliding deeper into recession and avoiding further collapse.
Copyright Dongying Wang
No comments:
Post a Comment