Britain's economy dangerously close to recession

PanARMENIAN.Net - Britain's economy shrank by more than expected in the fourth quarter, data showed Wednesday, January 25 placing it dangerously close to recession as the eurozone debt crisis and austerity measures hit output. Gross domestic product (GDP) dipped 0.2 percent in the three months to December, the Office for National Statistics said in a statement.

The decline was driven by weakness in the production and construction sectors, and was worse than market expectations for a 0.1-percent contraction. Economists warn this is likely to be followed by a decline in the current first quarter of 2012, which would place Britain back in recession - defined by two successive quarters of contraction. First quarter data is due in April.

Prime Minister David Cameron said the latest data was disappointing but stressed that the government would stick to its harsh austerity programme. "These are extremely difficult economic times. These are disappointing figures. They are not unexpected figures," Cameron said in his weekly question-and-answer session with MPs.

The coalition has sought to slash public spending and raise taxes to correct a record deficit that it inherited from the previous Labour administration in 2010. The opposition Labour party argues that the coalition is damaging the recovery with the rapid pace of its austerity measures. Britain's unemployment rate stands at 8.4 percent, the highest level for 17 years, following massive cuts to public sector jobs.

Although Britain is not a member of the eurozone, it relies on the crisis-hit region for about 40 percent of its trade. The International Monetary Fund on Wednesday slashed its 2012 British growth estimate to just 0.6 percent, compared with the prior forecast of 1.6 percent expansion, and blamed "intensifying strains" in the eurozone, AFP reported.