UK recession: long but relatively shallow

Projections published by the OECD today show that the recession in the UK is likely to be longer than in other G7 countries but of average severity. Although it is of little comfort given the projected 4.7% drop in year-on-year growth for Britain in 2009 but Germany, Japan, and Italy all face worse recessions.

The Chart below shows annualised quarter-on-quarter growth figures for 2008 and 2009. Projections are used for the third and fourth quarter of 2009. The data is available here.

The OECD report goes on to say, “Substantial slack combined with the prospect for a weak recovery, implies that strong policy stimulus will continue to be needed in the near term.” In relation to fiscal policy, where the Conservative Party have opposed the Government’s policy, the OECD write:

“it is important that announced stimulus measures be implemented promptly. However, the possibility of a recovery taking hold a little sooner than envisaged only a few months ago diminishes the likelihood that further fiscal stimulus will be needed in those countries having scope for such action. Looking further ahead, OECD countries need to prepare for the removal of the exceptional degree of support afforded by current monetary and fiscal policy stances. In this regard, preparing credible exit strategies and fiscal consolidation plans now, even if actual implementation will only commence later, is desirable.”