Despite a previous prediction for growth of 0.6 percent in 2012 by Standard Chartered bank economists, they have been forced to look again at the growth forecast for next year, now expecting the UK economy to contract by 1.3 percent.
The bank has also forecast that the Eurozone will have a worse performance, contracting by 1.5 percent next year.
The UK economy was expected to grow by 0.9 percent in 2012 according to the Office for Budget Responsibility, and surveys of forecasts for the economy carried out in November by the Treasury suggest figures for growth anywhere between -0.4 percent and 2.3 percent. Standard Chartered has been forced to change its forecast, influenced by “the mounting crisis” in the Eurozone and advanced economies.
Economist of Standard Chartered, Thomas Costerg has predicted that there will be a triple threat to the European economy. This will be a crisis of confidence which will result in reduced consumer spending and lower business investment.
The second threat to the economy will be banks with stricter lending criteria, and budgets being squeezed in Europe by the governments will become the third threat.
Standard Chartered believe that these shocks to the economy will plunge the UK and Europe into a recession. Predictions for the rest of the world however, are for 2.2 percent growth in 2012, and although growth in Asia will slow down it will be sufficient for a recovery of the world economy. The chief economist, Gerard Lyons said:
“It will be a recovery made in the East and felt in the West. If ever one needed to illustrate the shift in the balance of power, this is it.”
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