Whilst most of the headlines yesterday were to do with the changes to stamp duty, one other story stood out – the OECD (Organisation for Economic Cooperation and Development), a Paris-based “think tank”, whatever that means, predicted that the UK economy will go into recession at the end of the year.
The definition of a recession is when the economy has two quarters of negative growth, which it expects to happen between now and the end of the year:
The Paris-based think tank predicts that the UK economy will shrink at an annual rate of 0.3% in the third quarter, and by 0.4% in the fourth… the OECD says that the UK economy will grow by just 1.2% for the whole of 2008, a sharp reduction in its earlier forecast of 1.8% made just two months ago, and less than the 1.4% predicted by the IMF.
As Economonkey points out, there have been quite a few conflicting figures about the economy recently, making it difficult to know who to believe (here’s an interesting read on the difficulties in calculating GDP).
I’d also like an economist to explain to me just what difference falling into an official recession will make to us in any case – after all, people are already losing their jobs, pay seems to have stagnated, inflation is running high, more and more people are having their houses repossessed and more are going bankrupt. It seems the the effects of a recession are already here, even though we might not have quite met the necessary criteria to make it official.
When we do fall into an official recession, it’s likely to be greeted with hysteria in the media, but I don’t think it will be that much of a big deal to most of us, as we’re already feeling the effects. Am I feeling a bit gloomy? Probably, have you seen the weather outside?
photo credit: BraNewbs
I read that report too. While Gordon brown is saying ‘we are well equiped’ to weather the storm the OECD is saying the UK is the one economy in Europe where recession is a certainty.