Belfast Telegraph

UK and Europe 'weakest link' in hoped-for recovery

The UK and Europe will remain "the weakest link" in any global economic recovery this year, an economist said.

Northern Bank chief economist Angela McGowan spoke after provisional gross domestic product (GDP) figures showed a 0.2% contraction in the UK economy during October to December.

Prime Minister David Cameron said the worse-than-expected data showed the country was facing "extremely difficult economic times".

The Office for National Statistics' first estimate for the figure marks the first time the UK's GDP has fallen since the final quarter of 2010 when the Arctic weather was blamed for a 0.5% drop. The City had pencilled in a decline of 0.1%.

Ms McGowan said high inflation and squeezed incomes in 2011 had taken their toll, while the euro sovereign debt crisis worked to hold back investment decisions and raise uncertainty.

And with that crisis unresolved and posing a serious risk, she said: "We anticipate the UK economy and Europe will continue to be the weakest link in the global recovery.

"Nonetheless, our central forecast is for a continued recovery in the US and strong growth in emerging markets as inflation falls back. Growth in these areas should prevent the global economy from derailing."

But Northern Ireland would be stunted by the problems in UK and Europe with a likely small contraction in quarter one in UK and Europe.

But Ms McGowan added: "A reasonable recovery in the second half of the year is possible if policymakers in Europe resolve the debt crisis."

Dr Esmond Birnie, PwC's chief economist in Northern Ireland, said the final quarter fall was steeper than expected.

"Clearly the UK is now in danger of a double-dip recession while growth over the whole of 2011 was only 0.9%, as compared to 2.1% in 2010.

"With forecast growth for Northern Ireland in 2012 at around 0.6% we are clearly not generating sufficient real growth to reduce current levels of unemployment."

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