UK recession this year, says think-tank

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The Independent Online

The UK economy will fall into recession during the second half of this year, a think-tank forecast today.

The Paris-based Organisation for Economic Cooperation and Development (OECD) predicted that the UK economy will shrink 0.3 per cent in the third quarter, and by 0.4 per cent in the fourth. The definition of a recession is two successive quarters of negative growth.

According to official UK data released last month, the economy came to a standstill during the second quarter of 2008.

The OECD figures emerged in an "interim economic assessment" for the G7 group of seven leading industrialised nations, which comprise the UK, US, Japan, Germany, France, Italy and Canada.

Britain will fare the worst among the group of countries, the organisation said, with the other economies all slowing to a standstill at worst during the rest of this year.

The US will see growth slow to 0.9 per cent in the third quarter and 0.7 per cent in the fourth. Europe's biggest economy, Germany, will come to a standstill in the third quarter, the OECD said, and edge ahead just 0.1 per cent in the fourth.

Jorgen Elmeskov, the OECD's acting head of economics, said financial market turmoil, housing market downturns and high commodity prices were continuing to bear down on global growth.

"The eventual depth and extent of financial disruption is still uncertain, however, with potential further losses on housing and construction finance being one source of concern," he said.

The OECD is forecasting the UK economy to grow by just 1.2 per cent for the whole of 2008, well down on its earlier forecast of 1.8 per cent.

Last month the International Monetary Fund predicted the UK economy would grow 1.4 per cent this year.

There have been a series of gloomy economic forecasts about the UK economy in recent months.

Bank of England Governor Mervyn King said last month that the country would experience at least one quarter of negative growth in the coming year, while the British Chambers of Commerce has explicitly warned that Britain's economy will enter a recession within the coming year.

Yesterday the pound slumped to its lowest level for two years against the euro amid the gloomy economic outlook.