The race to recovery in 2009

Among the things to look out for in 2009 is whether – and when – our economy starts to recover.  Thanks to Alistair Darling’s optimistic prognoses in the Pre-Budget Report, there’s already plenty of room for embarrassment for the Government over this.  Their growth forecast for 2009 (of between -0.75 and -1.25 percent of GDP) is out of whack with the forecasts of almost every other major analyst (which averaged -1.7 percent in December).  And the idea that the economy will start recovering by the third-quarter of 2009 has also been widely scoffed at.

Accordingly, then, Brown is already making noises that the Treasury forecasts will have to be readjusted.  But, even so, the open goals will remain for the Tories to exploit.  If the economy fails to recover speedily, then they’ll be able to charge Brown with economic myopia – and not without reason.

But, from Brown’s perspective, perhaps the most damaging aspect of Darling’s optimism is the threat it presents to the twin narratives that “These problems started in America” and that “The UK is best-placed to deal with the downturn”.  What Darling’s done is to draw extra attention to to the comparative aspect of all this – i.e. when the UK starts recovering in comparison to when other developed economies start recovering.  If the UK loses the race to recovery in 2009, then more questions will be raised about the effectiveness of Brown’s economic management.

For the record, here’s a table of the OECD’s latest growth projections (adapted from their latest Economic Outlook).  They suggest that the UK may be lagging behind other leading economies, after all:

OECD forecasts for real GDP growth, percent