Grim expectations for UK economy

There have been more gloomy predictions about the state of the UK economy. The burden of UK government debt will remain above pre-crisis levels for 20 years, says the independent Institute for Fiscal Studies (IFS), a think tank. In its annual Green Budget, the IFS says that the government will need to raise taxes or cut spending by an extra £20bn to repair the public finances. Meanwhile, the International Monetary Fund predicts that the UK will see its economy shrink by 2.8% in 2009. It also expects the UK economy to grow by just 0.2% in 2010.

Link to BBC News

World economic growth is set to fall to just 0.5% this year, its lowest rate since World War II, warns the International Monetary Fund (IMF). In October, the IMF had predicted world output would increase by 2.2% in 2009. It now projects the UK, which recently entered recession, will see its economy shrink by 2.8% next year, the worst contraction among advanced nations. The IMF says financial markets remain under stress and the global economy has taken a "sharp turn for the worse".

Link to BBC News

Watch the IMF press conference highlighting the key aspects of the report.

Bailing out the banks - possible 'Government Failure'?

An article in The Independent analyses the possible consequences of the government bailout of the banks. The overall figure appears to be around £1 trillion , nearly equal to our annual GDP. Will this solve the problems of the banking sector or will they merely be transferred to the state? The amount imvolved will have a big impact on the National Debt which will beome a burden if it is unsustainable. Remember what we mean by 'Government Failure' - where intervention leads to a loss of economic welfare rather than a gain. Is this an example of the costs of intervention exceeding the benefits?

Link to article.