Daily Management Review

High Recession Risk For Stalling British Economy, Says NIESR


07/22/2019




High Recession Risk For Stalling British Economy, Says NIESR
The National Institute of Economic and Social Research (NIESR) of the United Kingdom has warned that there is a one-in-four chance that the crisis surrounding uncertainty over Brexit has already moved the country into a recession as can be seen with stalling economic growth of the country.
 
Considering the ever increasing chances- currently at about 40 per cent, that the UK would have to ultimately leave the European Union without any deal on trade means that the risks to growth were “heavily weighted to the downside”, said the NIESR.
 
According to the comments from the front-runner to becoming UK prime minister this week - Boris Johnson, there would be a boost in efforts to prepare for a no-deal Brexit by him if he came to power so that the European Union is forced to bring in changes by itself to the agreement that that it had made with Prime Minister Theresa May but which was not approved by British lawmakers later on. 
 
According to a previous estimate by the NIESR, there has been a contraction in the UK economy in the quarter ending June 2-019. Economists would officially classify the UK economy to have entered a recession – its first since to global financial crisis of 2008-0 if there is a further contraction in the British economy in the third quarter of the current as well.
 
The chances of the UK entering a full blown recession was also strongly expressed and conveyed by Britain’s budget forecasting office too last week. Prospects for the coming quarters were fraught with danger, it said in a report published on Monday.
 
 “The outlook beyond October, when the United Kingdom is due to leave the European Union, is very murky indeed with the possibility of a severe downturn in the event of a disorderly no-deal Brexit,” it said.
 
From its previous estimates of 1.4 per cent and 1.6 per cent, NIESR reviewed its forecast for Britain economic growth for 2019 and 2020 at 1.2 per cent and 1.1 per cent respectively. Considering an average of all Brexit scenarios, the institution said that there is a chance of 30 per cent that there can be a recession in 2020 in the fifth-biggest economy of the world.
 
“There is no palpable growth for some years to come following a no-deal Brexit,” NIESR director Jagjit Chadha said at a news conference.
 
NIESR said that public finances are most likely to face a hit even if a proper Brexit deal is managed to be arrived at by the next prime minister of Britain. “Some loosening of the public purse appears inevitable and we expect public sector borrowing to rise above 2% of GDP with the possibility of substantial over-runs of the government’s fiscal objectives in the event of a no-deal Brexit,” it said.
 
Both the candidates who are running to be UK’s prime minister have pledge to increase government spending which has been criticized by some quarters.
 
(Source:www.reuters.com)






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