Britain was on Tuesday expected to discover that its record recession officially ended in the fourth quarter of 2009 but the nation’s huge debt looks set to stunt recovery, economists said.
The Office for National Statistics will publish data widely-expected to show that the economy grew by 0.4 percent during the final three months of last year following six quarters of negative figures.
However, the good news about the economy may not be enough for Prime Minister Gordon Brown to keep his job after the looming general election, whose date has not yet been set but which must take place by June.
The economy faces a bleak future with public borrowing forecast to hit a massive £178 billion in 2009/10.
Despite a mountain of debt as a result of the multi-billion-pound bailout of the nation’s struggling banks, Brown has insisted that it was not the time to cut state aid.
“If you withdraw the stimulus too quickly, then you risk a period when you put the recovery at risk. There is no doubt that that’s the view of the rest of the world. It is certainly my view,” Brown told a press conference on Monday.
The future for the British and wider global economy is far from rosy, with the International Monetary Fund and the United Nations recently warning of a possible renewed or “double-dip” recession this year.
Those worries have been heightened in Europe, where several nations — notably Greece and Portugal — are struggling to cope with soaring public debt.
“The UK looks to have a weak recovery this year even as it is expected to have exited recession in the fourth quarter,” said Linda Yueh, an economics expert at Oxford University.
“No current credible plan to reduce the fiscal deficit and the uncertainty associated with an upcoming general election could mean a growing risk premium on debt and the cost of servicing that could in turn dampen growth.
“All in all, a ‘double dip’ is possible or a stagnant quarter in 2010,” Yueh told AFP.
The state of the economy has become the key battle ground ahead of the general election that is likely to see Brown’s Labour Party defeated by the opposition Conservatives, according to polls.
Whichever party wins power, Britain faces public spending cuts and taxation hikes in the years ahead as it looks to reduce state borrowing, economists say.
The economy, which is also struggling with high unemployment caused by the financial crisis, contracted for six quarters in a row up until the final quarter of 2009 — its longest recession since records began in 1955.
Chancellor Alistair Darling recently admitted that the recession would be deeper than thought — with the economy predicted to have shrunk 4.75 percent in 2009 compared with a prior official estimate of 3.5 percent.
The economy is expected to grow by 1.0-1.5 percent in 2010, Darling added.
