Britain emerges stronger from recession
31 Mar 2010
Britain's economy came out of an 18-month recession at the end of last year in an unexpectedly better shape than what was being projected, though the revival may still flounder in the still uncertain conditions ahead say analysts.
However, the Labour government's hope to draw some cheer from the projected scenarios, which may have given the beleaguered Labour party a leg up in the election due to be held on 6 May did not materialise. An economic recovery would improve its sagging popularity after the worst downturn on record, according to analysts.
According to the Office for National Statistics, UK's gross domestic product grew 0.4 per cent in the last three months of 2009, higher than the forecast 0.3 per cent growth.
Looking ahead, analysts said, the first quarter looked uncertain and it remained the case that the economy was fragile and still required a large degree of policy accommodation to enable it to gain traction.
The Pound Sterling was up on the surprisingly strong data but markets still expect monetary policy to remain liberal for some time to come even as the government warned against complacency with the weakness in the euro zone, Britain's biggest trading partner.
While Britain has been stuck in recession for a longer period than some of its neighbours, the return to growth in Europe has been patchy.
Speaking to MPs on Tuesday, Alistair Darling, chancellor of the exchequer, took some of the credit for the stronger than expected figure but acknowledged that the continuing stimulus measures had contributed in no small measure to it. He said, "It's correct that some of the stimulus - not every measure, but some of the measures - that I announced in November 2008 at the pre-Budget report are being withdrawn," he said. "The biggest single stimulus was a VAT cut. And I said explicitly that was going to run for 13 months and I believe that my decision was right. Part of the [upward revision] was due to the fact that expenditure was brought forward into 2009, which is what I wanted to do. Had that run on further than that, not only would have there been a loss to our revenues, but it wouldn't have had the same effect.
According to data, Britain's current account deficit was down sharply in the fourth quarter to £1.684 billion from £ 5.912 billion, the lowest since the first quarter of 2008. Meanwhile, earnings on investment overseas were at the highest since records began in 1964.
Year-on-year, GDP shrunk by 3.1 per cent, less than the 3.3 per cent previously reported.
According to the statistics office, the upward revision to the GDP came on a combination of higher services, construction and agriculture output.
According to analysts, the risks of a double dip were modest though there were still some significant causative factors.
