New Stats Chart 2009 Recession
- January 26th, 2009
- Posted by EUEditor
The United Kingdom has joined Germany as major EU member states now in recession with contracting economic growth rates and growing unemployment.
The European Commission has released an economic overview report pointing to possible negative growth for the whole of the EU this year.
LEADING ECONOMIES FALTER
The British Prime Minister Gordon Brown pledged to use “every weapon at our disposal” to combat the downward trend, as new figures showed the economy had shrunk in two successive quarters – at a faster rate than forecast.
Stimulus measures and government acquisitions in the banking sector, including acquisition of bad debts, had not as yet headed off falls in share prices and in the value of the UK currency, the Pound; Britain’s economic indicators are now among the worst for close to a quarter of a century.
Figures have emerged from bank surveys in Germany indicating so-called “toxic assets” may be in the area of €300-billion (A$590.65-billion; dcerates.com, 26.1.09).
Those “assets” such as loans that cannot be paid, and have been sold on to banks, precipitated the financial crisis of 2008, when €4-billion (A$7.88-billion) of public money was committed in Germany to relieving the pressure on financial institutions — to the point of buying some of them out.
Four of the largest five national economies – Britain, Germany, Japan and the United States – have gone into recession; China, surging for nearly two decades off a very low base, has seen a sharp reduction in its rate of growth.
EU PROSPECTS WEAKEN
The European Commission has released (19.1.09) its extended Interim Forecast, showing aggregate economic growth had come down to 1% for last year, with a further drop of up to 2% likely in 2009.
It has foreshadowed high unemployment but an easing of inflation in response to the economic recession in the European Union.
INTERIM REPORT
It said:
“Amid exceptional uncertainty about global developments … the Commission forecast estimates that economic growth to have dropped to about 1% in 2008 in both the EU and the euro area (down from just below 3% in 2007).
“In 2009, real GDP is expected to fall by less than 2% in both regions, although growth is projected to remain positive in nine Member States.
“This represents a downward revision of about 2 percentage points compared to the previous Commission forecast of last autumn. GDP growth is expected to turn moderately positive in 2010, to around 0.5%.
“The deteriorated outlook is the result of the impact on the real economy of the intensified financial crisis and the ensuing global downturn.
“The severe economic downturn will have a profound impact on labour market developments and public finances over the forecast horizon, though inflation pressures continue to ease from earlier heights.
“However, the discretionary fiscal measures announced since August 2008 will limit the contraction in GDP growth by about 0.75% this year …
“On the positive side, inflationary pressures are abating rapidly amid faltering commodity prices that drove inflation in the past. Consumer-price inflation is now expected to fall from 3.7% in 2008 in the EU (3.3% in the euro area) to about 1% in 2009 and just below 2% in 2010 in both regions.â€
Reference:
Deutsche Welle radio, business and finance, Bonn, 24.1.09
European Commission, Directorate General Economic and Financial Affairs, Brussels; Interim Forecast, January 2009.
http://ec.europa.eu/economy_finance/pdf/2009/interimforecastjanuary/interim_forecast_jan_2009_en.pdf, (26.1.09)
European Commission, Brussels; EU interim forecasts for 2009-2010: sharp downturn in growth; IP/09/67, 19.1.09
The Australian: Business / Wall Sreet Journal, “British economy officially in recessionâ€, 26.1.09. www.theaustralian.com.au/business…â€, (26.1.09)