The U.K. economy is likely to have contracted for the third time in the second quarter, sinking deeper into the double-dip recession.
Economists forecast a 0.3 percent decline in gross domestic product in the second quarter, following a 0.2 percent fall in the first quarter.
Two consecutive contractions plunged the nation into its first double-dip recession since 1970s in the previous quarter.
The Office for National Statistics is slated to release the first estimate of GDP on July 25. The GDP figure will be based only on the output side of the economy namely production, services and construction, without taking into account the expenditure side.
IHS Global Insight economist Howard Archer says the economy will achieve growth in the third quarter and will continue expanding in the fourth quarter this year. However, tight fiscal policy and significant problems for consumers are expected to continue to limit economic activity.
The economy will receive a limited boost from the staging of the Olympic Games. Ernst & Young ITEM Club also sees the economy returning to a growth path in the coming six months on higher consumer spending.
The widening budget deficit in June has raised concerns about the ability of the government to bring down its budget deficit to the GBP 120 billion target over the current fiscal year.
The Institute for Public Policy Research reportedly urged the government to borrow more and implement temporary tax cuts as current austerity measures are dampening activity. It said the economy will lose GBP 165 billion in output by 2015.
The International Monetary Fund has urged the British government to reduce the pace of fiscal consolidation if growth fails to gather momentum.
The Bank of England expanded its quantitative easing by GBP 50 billion early this month and policymakers even examined the merits of easing interest rate below 0.50 percent. The central bank also introduced measures to boost lending.
by RTT Staff Writer
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