UK to enter recession in 2012, warns Niesr

3 February 2012 | By Chris Salih

The think tank says it expects the economy to shrink by 0.1% in 2012 and has called on the Government to temporarily ease spending cuts to promote growth.

Recession is traditionally defined by an economy recording two consecutive quarters of economic contraction. Official figures in January showed the UK economy shrank by 0.2% in the final quarter of 2011.

Niesr has added that it expects the UK economy to grow by 2.3% in 2013.

Niesr says: “We forecast a return to technical recession in the first half of this year, as households continue to retrench, credit conditions remain tight, and businesses are reluctant to invest given uncertainty about both domestic and foreign demand.”

The think tank also said that inflation would fall sharply to 2.2% this year and 1.4% next year, however, it has warned that unemployment could reach 9% in 2012 and will remain above 7% in 2014.

Niesr has forecasted global growth of 3.5% for 2012.

It says: “Growth will accelerate to 4% in 2013, representing a downward revision of about half a percentage point in each year compared to our last forecast.”

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