Forecast
for UK Economy 2009
The
UK economy has experienced
a long period of economic
growth from 1993 - 2008. However,
this unprecedented period
of unbroken economic growth
is coming to an end.
The
UK economy is experiencing
a number of problems
Credit
crunch leading to shortage
of borrowing and lending
Falling house prices, which
is reducing consumer confidence
and consumer spending.
Record debt levels which leave
little room for manoeuvre
in a recession.
Cost push inflation making
it difficult for the MPC to
cut rates. Inflation well
above the government's target
of 2%
Increased government borrowing,
as the cyclical downturn worsens
the governments finances.
Global
economic downturn causing
lower exports. e.g. even the
devaluation in the pound has
done little to boost growth.
Persistent weakness in Manufacturing
sector - contributing to persistent
current account deficit.
In
the next 12 months, growth
will slow and the economy
will enter recession. However,
with the slowdown in growth
and lower oil prices, inflation
will fall enabling lower interest
rates. This will help the
economy to recover.
The
housing market will struggle
to recover whilst the shortage
of mortgage finance persists.
Also whilst house prices are
falling people won't want
to buy so the problem will
be exacerbated.
Falling
house prices will also continue
to have a negative impact
on the economy in 2009.
