Britain's Shrinking Economy-Tracking to 1931 Levels

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Britain's Shrinking Economy-Tracking to 1931 Levels

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Like it’s EU counterpart, Germany, Britain’s economy is contracting at rates not seen since the end of World War II. If Britain stays on the current track it could approach figures last seen in 1931.

Predictions for Britain to shrink by 3.5 to 4.5 percent this year. Bloomberg reports:

The recession, which may turn out to be the worst since the 1930s, prompted Prime Minister Gordon Brown’s government to say this week that the budget deficit may swell to a record and is casting doubt on Britain’s credit rating. The Bank of England nevertheless argues the slump may be easing as they print money to stave off deflation and keep rates at a record low.

“It’s shockingly bad,” said Alan Clarke, an economist at BNP Paribas SA in London. “People still aren’t pessimistic enough. This casts shadows over any green shoots of recovery. This recession will be more prolonged than people expect.”

Stratfor says that Germany’s economy could shrink by more than 5%:

The Organization for Economic Cooperation and Development has predicted that the German economy might shrink by as much as 5.3 percent in 2009, a much bleaker outlook than the 2.3 percent decline forecast by the European Commission in January. The 5.3 percent contraction would represent the biggest decline for Germany — excluding the immediate post-World War II devastation of 1945 and 1946 — since the depths of the Great Depression in 1932, when the economy shrank by roughly 7.5 percent. Considering that Germany’s GDP equals three times the combined output of its central European neighbors, the slump is certain to have immense effects on the rest of Europe.

Any uncertainty in the mood of Germany does not bode well for European stability. We are not out of the woods yet.