UK Economy To Shrink By 1.5% In 2009: NIESR

Source : The Business Times, November 24, 2008

LONDON - Britain's economy will shrink by 1.5 per cent next year and unemployment could rise as high 2.5 million in 2010, the National Institute of Social and Economic Research forecast on Monday.

These figures do not take account of any fiscal stimulus measures announced by the government in its pre-budget report later on Monday. The thinktank calculates that a 30 billion pound package could improve growth by 1 per cent next year.

'We expect the UK economy to shrink for six quarters in a row, with the economy not starting to recover until early 2010,' NIESR said.

Inflation was likely to fall below the Bank of England's 2 per cent target over the medium term, with a one in ten chance of deflation, so there was further room to cut interest rates, NIESR said.

If oil prices had not fallen sharply, growth would be even weaker, and employment could even reach 3 million if recent migrants did not leave Britain, it added. -- REUTERS