Britain Increased Risk of Economic Stagnation

British Finance Minister Osborne said recently that the UK economy can begin to be cautiously optimistic about the situation, but from the Bank of England - Bank of England, but statistics show that the recovery of the UK economy is slow and underpowered. Especially by the Conservative Party and the Liberal Democrats since the new government coalition formed in May, immediately following the former Labor government's economic policy to implement large-scale adjustment of the focus is to substantially cut the fiscal deficit, which measures the prospects for Britain's economic recovery is not added less uncertainty. From the current perspective, the British economy significantly increased the risk of stagflation.

Can not be optimistic about the prospects of economic recovery slow

In the current global economic downturn, the British are the worst hit one of the major Western countries. Starting from the second quarter of 2008 until the third quarter of 2009, the British economy continues to six-quarter decline since the 30s of last century the longest, most serious in a recession, the economic crisis. First half of the picture is not optimistic about economic growth in the first quarter was only 0.3% below last year's fourth quarter, an increase of 0.4%. Although the second quarter of this year's growth rate reached 1.1%, but pessimistic about the prospects of the UK economy is more and more recent arguments.

Bank of England Bank of England governor Mervyn King on the 11th � again warned Britain's economic recovery will be "full of twists and turns", to return to the pre-crisis levels will require several years. At the same time, the economic outlook has been the most optimistic forecast the Bank of England's economic growth next year from the original estimate of 3.5% down to 3%, this degree lead to large fluctuations occur London.

From the first half of the development trend of the UK economy this year, the recovery is expected to remain relatively stable situation, but recovery slower. Is mainly due to the severe economic crisis brought against a longer recovery time. According to the IMF spring meeting issued the "World Economic Outlook" report predicted, this year's Britain's economic growth rate of only 1.3%, broadly in line with major EU countries Germany and France's economic growth was flat. Next year's economic growth will reach 2.5%. British government recently announced next year's growth forecast and the roughly equal, the economic growth forecast for this year only 1.2%, next year will grow by only 2.3%.

Vigorous cost-cutting could endanger the recovery

Concern is that the Blair government introduced cuts in economic policy may be based on the faltering added to the difficulties of recovery, they could delay the pace of recovery, may also lead to the risk of the economy into recession again.

According to the British government made an emergency budget in late June to the end of 2015 the current government, would cut 32 billion pounds a year in government expenditure, government departments, welfare programs, education, health and even the Queen were to be the royal family's spending cuts. Expenditure of government departments which cuts up to 40%. At the same time, from early next year should the sales tax from the current 17.5% to 20%. This measure is expected to increase annual revenue for the government 11 billion pounds. Government expects that this support will increase by the British in the 2015-2016 fiscal year to achieve fiscal balance, so that the current annual deficit of about 150 billion pounds disappear and the emergence of budget surpluses. This is the British government since World War II the largest taken action to reduce expenditure.

Some economic analysts, including forming the new government responsibility for the budget after the establishment of this bureau officials said, the economy has just started when the power recovery and Quefa, substantial cuts in government spending and raise the consumption tax will make the fragile economic recovery is facing new dangers.

Inflation at a high overall prospects look bleak

In the economic recovery is weak and short-term prospects are not optimistic at the same time, Britain's inflation is still at a high level, but also a substantial decline in the short term is unlikely. Latest figures show Britain's consumer price index annual rate had reached 3.7% in April, for the past 17 months, the largest increase. Although declining thereafter, in June the UK's consumer price index fell 3.2 percent annual rate, but still well above the Bank of England's 2% inflation control targets. And in June a major reason for price drop is larger that the oil price decline due to temporary factors.

Although the Bank of England that the UK consumer prices in the coming period will continue to rise, but is expected next year to 2% within the control objectives. Britain's inflation outlook is very optimistic, down to control whether the goal is a big question mark, the possibility of increased occurrence of stagflation.

In the long run, the new British government to reduce huge government budget deficits are naturally conducive to long-term economic stability and growth. However, if cost-cutting, "ax" and also chop the current recovery has just unearthed near the "green shoots", or even lead to economic stagnation, would lead to unfavorable, worth the results.

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