Survey shows UK heading for first recession since 2009
The weaker outlook since the Brexit vote has
for the first time since 2012. LONDON: The United Kingdom economy may be heading for its first recession since 2009, with economists slashing their forecasts in the wake of the Brexit vote and now seeing two quarters of contraction this year.
While the 0.1 per cent decline in gross domestic product anticipated in each of the third and fourth quarters is modest, it will mark the end of more than three years of unbroken growth.
The projections in the Bloomberg survey compare with a 0.6 per cent growth predicted for those periods before the June 23 referendum.
The changed outlook since the UK voted to leave the European Union has the Bank of England (BoE) — which had been on a slow track toward interest-rate increases — now contemplating expanding stimulus for the first time since 2012.
While the impact is only showing up so far in measures of consumer and business confidence, that could ultimately spill over into key drivers of growth in the coming months, stymieing the economy.
Even with some predicted BoE stimulus, the probability of Britain sliding into its first recession since 2009 stands at 40 per cent, up from 18 per cent last month, according to the survey, which was conducted after the central bank’s policy announcement last week.
That’s the highest since Bloomberg started tracking the likelihood in 2012.
“We expect to see a recession around the turn of the year, based on the idea that there will be quite a large uncertainty shock which will lead to corporate retrenchment,” said Nick Kounis, head of macroeconomic research at ABN Amro Bank NV in Amsterdam.
BoE policymakers “need to wait for a little bit of evidence but they can’t wait until it has already happened because monetary policy works with a lag”. Bloomberg