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Home Markets Insight Standard Chartered warn of increased likelihood of double dip recession
Standard Chartered warn of increased likelihood of double dip recession PDF Print E-mail
Written by Gary Howes   
Thursday, 08 July 2010 08:08
Standard Chartered researchers say premature fiscal tightening could cause double dip recession. IMF cuts growth forecasts for UK economy.


Cameron Spending Cuts

The UK economy could be in for a fresh bout of negative quarterly GDP figures as a result of the fiscal tightening being implemented by the Conservative lead Government.

According to researchers at Standard Chartered Plc (LON:STAN), "Premature policy tightening is one key factor that could trigger such a double-dip. The recent G20 meetings, where leaders spoke globally but acted nationally, reinforced this worry."

Standard Chartered maintains that monetary conditions in the West need to stay accommodative.

In the face of fiscal tightening avoiding a major economic contraction will require strong global demand to come from somewhere.

"Our bet is on the emerging world," say Standard Chartered who derive the majority of their business from Asia and Africa.

IMF lowers growth outlook for UK economy


The International Monetary Fund (IMF) lowered its forecast for UK economic growth as a result of planned government budget cuts.

The Washington-based fund sees the UK economy expanding 1.2 percent this year and 2.1 percent in 2011, it said in a report today.

It previously forecast expansion of 1.3 percent and 2.5 percent for those years.

Britain faces the largest public spending cuts since World War II as the government prematurely tries to reduce the record budget deficit.

Former Bank of England policy maker David Blanchflower said the cuts may lead to a double-dip slump, while current rate setter Adam Posen said the UK is “tentatively” recovering and risks falling back into recession.

Babcock expects fiscal tightening to benefit

However there is one group that expects better business conditions courtesy of the deep spending cuts.

Defence services group Babcock International Group (LON:BAB) said it had started the 2010/11 fiscal year well and expected outsourcing opportunities to increase as Britain looks to cut its budget deficit.

Babcock, which maintains Royal Navy submarines, said it had a healthy bid pipeline and its order book had remained stable at 8.3 billion pounds.

"As the government seeks to address the fiscal deficit in the UK, we believe there will be an increase in outsourcing opportunities in our chosen markets," the group said in a statement on Thursday.
Last Updated ( Thursday, 08 July 2010 08:15 )