The English economy increased its rate of decline at the end of 2008, a more steeply than anticipated in our scenario of autumn. Moreover, the contraction was extended to segments of the economy so far remained relatively untouched by the recession. Cyclical time and the prospects are characterized by three elements bearish bias. On the one hand, the fall in global economic activity. Secondly, a more expensive credit to finance the private sector. These two factors have a close connection with a financial crisis and walks toward the two-year, but is a turning point towards their resolution. Third, the English economy is still burdened by the downsizing of real estate. These are all elements that combine to have large destabilizing power and inevitably lead to a recession.
However, the downturn in the economy is going to be cushioned by the existence of other three elements, in particular, affect household income and positive shocks. This is the case of interest rate cuts, fall in inflation and an expansionary fiscal policy will help to limit the decline in spending and employment in 2009. The output of the recession will be relatively slow given the expected long period of deleveraging of the agents, the absence of an external environment dynamic enough to drive English growth and the limited effectiveness of fiscal stimulus to boost the economy in a permanent and autonomously.
Source: Journal Status BBVA Spain in March 2009 SEE
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