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UK economy

The coalition government led by David Cameron has been criticised for sticking to a strategy of austerity even though the country was expected to suffer a triple dip recession in early 2013. It was also stripped of its prized AAA credit rating in February 2013.

BusinessEconomy

Britain's business minister sees risk of triple-dip recession

PUBLISHED : Monday, 10 December, 2012, 5:35am
UPDATED : Monday, 10 December, 2012, 5:36am

British business minister Vince Cable said Britain could fall back into recession for a third time since the 2008 financial crisis but expected the economy to stagger on with minimal growth.

In an interview published on Sunday, Cable, one of the most senior ministers in the coalition’s junior Liberal Democrats, said Britain could also face a Japanese-style stagnant “lost decade”.

“There is a real worry about (that), a real risk of that,” he said. Asked if the economy was heading for a ‘triple-dip recession’, after falling twice into negative growth since the financial crisis, he said: “There is certainly a risk.”

“I always try not to get drawn into forecasting arguments (but) there is clearly a risk. The most likely outcome is that we continue to bump along the bottom,” he added in an Observer newspaper interview.

Conservative finance Minister George Osborne announced new official forecasts on Wednesday that slashed expected growth to 1.2 per cent next year and 2 per cent in 2014, with the economy seen shrinking this year by 0.1 per cent.

Cable, a former economist who is responsible for Britain’s industrial policy, has long said Britain’s economy is starved of demand, but supports the coalition’s austerity programme aimed at slashing its budget deficit.

The government hopes that loose monetary policy and record low interest rates will nurture a private sector recovery, but Cable said he hoped the Bank of England’s new governor Mark Carney would come up with fresh ways to assist the economy when he takes up the post next summer.

“We have got to have a very expansionary monetary policy, which we have had until quite recently, but I sense the Bank of England is running out of steam, or perhaps motivation. A lot depends on this new governor,” he said.

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