The European Commission today became the latest international body to issue a warning on the state of the UK economy, reports Shamik Das.
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The European Commission today became the latest international body to issue a warning on the state of the UK economy.
The EC’s “Assessment of the 2012 national reform program and convergence program document” says:
Growth is likely to remain subdued in 2012 as the fiscal consolidation continues, the outlook for the European economy remains weak, and UK consumers remain squeezed, despite gaining some benefit from falling inflation.
The UK has a considerable challenge ahead in reconciling a need for further deleveraging with the need for more investment across the economy to support sustainable and balanced growth…
Although the government has started to make progress on reducing the deficit, this is still forecast to stand at 6.1 % in 2012-13, one of the highest levels in the EU, and fiscal consolidation remains a pressing challenge for the UK.
Today’s warning follows the IMF’s ultimatum last week that, should the economy continue to stagnate, the government should switch to a “Plan B”:
If growth does not build momentum and is significantly below forecasts even after substantial additional monetary stimulus and further credit easing measures, planned fiscal adjustment would need to be reconsidered.
The OECD also recently said the UK economy will grow only 0.5 per cent in 2012.
• New poll reveals the consensus behind austerity is shattering 25 May 2012
• Oxfam: Austerians guilty of “bad economics, bad arithmetic and ignoring the lessons of history” 24 May 2012
• IMF tells Britain: If your economy fails to recover, it’s time for plan B 22 May 2012
• Balls: Osborne’s “we’re all in this together” economic mission has failed 18 May 2012
• Osborne’s ideology-driven economics have failed: We’re all paying the price 25 Apr 2012
However, today’s EC report wasn’t all bad news – inflation is expected to continue on a downward spiral, and there is forecast to be an Olympic bounce, with growth picking up in the third and fourth quarters of 2012 and continuing into 2013:
This growth is expected to come from an uptick in both consumption and corporate investment, which will be aided by the London Olympics in the third quarter of 2012.
Inflation expectations of both business and households for 2012 are significantly lower than in 2011. Inflation is expected to decrease to an average of 2.9% in 2012.
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19 Responses to “Now the EC warns Osborne: Deficit “projected to fall more slowly” due to weak growth”
Mr. Sensible
How many more of these does Osborne need before changing course?
Anonymous
You’re asking silly questions again…
All Thats Left
George Osborne doesn’t know what he’s doing – he has only one trick and that one has been proved to be wrong. Paul Krugman’s analysis last night at his lecture at the LSE was spot on – for those who missed it – we’ve analysed Krugman’s analysis – follow the link: http://www.allthatsleft.co.uk/2012/05/krugman-on-labour-like-them-only-less-so/
Robert CP
Now the EC warns Osborne: Deficit “projected to fall more slowly” due to weak growth: http://t.co/AgMfYrn2 by @ShamikDas
Anonymous
The EC is saying that consumption during the Olympics will boost growth. Not that the Olympics will make a profit. Money to hold the Olympics that has already been spent is just irrelevant to what will happen in the third quarter of 2012.