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World Faces “Worst Economic Downturn Since WW2”, But UK to Escape Recession – Report

News, 29 October 2001


The world may be standing “on the brink of the worst economic downturn since the Second World War,” says a report from Deloitte & Touche.

The accountancy firm highlighted “signs of acute economic weakness” in the eurozone, predicted that America would enter a full-blown recession, and added that there is no let-up in sight for Japan and several other Asian countries already in recession.

However, the firm’s economic adviser Roger Bootle stressed that the downturn was not the result of last month’s terrorist attacks, though he added that these events would be blamed anyway.

“While the aftermath of the September outrages will, of course, be negative, the lesson of history is that the economic significance of non-economic events is often exaggerated at the time,” said Bootle. “The world is set for a period of very low inflation, low interest rates and weak growth – but little of this will be due to the events of 11 September.”

Although growth in the UK will fall to around 1.7% next year, Britain nevertheless seems set to “escape a recession proper” thanks to sturdy consumer spending. However, the report issued a caveat: “If consumer spending were to collapse, there is no doubt that the UK too would experience recession.”

These findings chime with better-than-expected growth figures released by the British government. For the third quarter, gross domestic product rose 2.2% year-on-year and 0.6% compared with Q2 – higher than market estimates of 2% and 0.4%. GDP growth for 2001 as a whole is expected to be comfortably above 2%.

News sources: BBC Online Business News (UK); Deloitte & Touche website; Wall Street Journal