A leading think-tank certainly seems to think so, as the Government continues its fiscal squeeze and households cut back on spending.
The National Institute of Economic and Social Research (NIESR) are predicting that there will be a 0.1% drop in GDP this year, due to restrictive credit conditions, coupled with uncertainty in the Eurozone and household belt-tightening – seeing the UK fall back into recession in the first half of 2012.
NIESR does expect the economy to return to growth at 2.3% in 2013 but (and this is a big but!) only if the Eurozone debt crisis is addressed.
But it says unemployment will rise to 9.1% before that and may not ever return to its pre-crisis level without action by the Government to boost near-term spending. Unemployment currently stands at 8.4%, and NIESR predicts it will remain above 7% in 2014.
NIESR has been urging the Government to ease its austerity drive for a long time. It estimates in the report that debt-financed investment spending of around £15bn would reduce the expected unemployment rate by 0.3%
“The credible commitment to a sustainable fiscal policy over the longer term provides the government with the flexibility to provide a clearly defined and temporary boost to near-term demand,” states the institute.
Chancellor George Osborne, who will deliver the next Budget on March 21, has pledged to stick to his fiscal plans despite the weakening economy.
NIESR have predicted that inflation would fall, with the consumer prices index falling to 2.2% this year and 1.4% in 2013.
Jon Stone, 03/02/2012
