UK may be heading toward 'Triple Dip'
Source: Agencies |
April 25, 2013, Thursday
|
Print Edition
Print Edition
RECESSION may just be a word. But in Britain it may become a habit - and a dangerous one at that.
It's possible that official figures on first quarter economic growth, to be released today, could put the country back in recession, and tension is building.
Although economists on average expect growth of 0.1 percent on the quarter, they warn it would take the smallest statistical variation to put the figure in negative territory. That would place the country in recession, technically defined as two consecutive quarters of economic contraction.
Another recession - the third since the 2008 financial crisis - is already being referred to with foreboding in the media as a "Triple Dip." Experts warn that its confirmation would create a wave of negative media attention that would scare consumers away from spending, feeding into a vicious cycle that has the economy flat-lining.
"It's psychological - this is all psychological," said Cary Cooper, a professor at Lancaster University Management School. "It's about the message that those figures send to consumers and small businesses."
The government desperately wants a strong number to justify its increasingly criticized policy of painful spending cuts. But recent indicators on Britain's economy, the third-largest in the 27-country European Union after Germany and France, have been disappointing.
Inflation is rising, cutting into people's standard of living. Unemployment is up. Two international ratings agencies have downgraded the country's credit grade from the top level AAA, warning about the government's fiscal policies.
The government, which has long played on its AAA rating as a sign of its economic might, has been pursuing a harsh program of spending cuts and tax rises to reduce the budget deficit, which at 7.4 percent of annual economic output is more than twice the EU's 3 percent limit. Like many governments across Europe that have been scarred by the bond market turmoil that forced Greece and four other countries to need rescue loans, Britain is focusing on slashing debt quickly, even at the cost of short-term economic pain.
What some governments and economists are slowly realizing, however, is that they may have underestimated the damage such austerity would do.
It's possible that official figures on first quarter economic growth, to be released today, could put the country back in recession, and tension is building.
Although economists on average expect growth of 0.1 percent on the quarter, they warn it would take the smallest statistical variation to put the figure in negative territory. That would place the country in recession, technically defined as two consecutive quarters of economic contraction.
Another recession - the third since the 2008 financial crisis - is already being referred to with foreboding in the media as a "Triple Dip." Experts warn that its confirmation would create a wave of negative media attention that would scare consumers away from spending, feeding into a vicious cycle that has the economy flat-lining.
"It's psychological - this is all psychological," said Cary Cooper, a professor at Lancaster University Management School. "It's about the message that those figures send to consumers and small businesses."
The government desperately wants a strong number to justify its increasingly criticized policy of painful spending cuts. But recent indicators on Britain's economy, the third-largest in the 27-country European Union after Germany and France, have been disappointing.
Inflation is rising, cutting into people's standard of living. Unemployment is up. Two international ratings agencies have downgraded the country's credit grade from the top level AAA, warning about the government's fiscal policies.
The government, which has long played on its AAA rating as a sign of its economic might, has been pursuing a harsh program of spending cuts and tax rises to reduce the budget deficit, which at 7.4 percent of annual economic output is more than twice the EU's 3 percent limit. Like many governments across Europe that have been scarred by the bond market turmoil that forced Greece and four other countries to need rescue loans, Britain is focusing on slashing debt quickly, even at the cost of short-term economic pain.
What some governments and economists are slowly realizing, however, is that they may have underestimated the damage such austerity would do.
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