George Osborne Hints At Bad News For GDP
George Osborne raised the prospect today that GDP figures will show next week that the UK economy shrank in the last quarter of 2011.
Speaking to the BBC during his visit to Japan, Osborne was careful not to make any predictions for what the figures will show next Wednesday.
But in the space of a two-minute interview, he twice reminded his interviewer that the independent Office for Budget Responsibility (OBR) had forecast negative growth for the last three months of the year.
His comments may spark speculation that he is seeking to "soften up" expectations to prepare for bad news on January 25.
Osborne said: "I don't know what next week's GDP is going to be. Our independent forecaster, the OBR, has warned us that it may well be a negative number. That was their forecast in November, but they didn't forecast a recession."
In its Economic and Fiscal Outlook, published at the time of the Autumn Statement in November, the OBR predicted a 0.1% contraction in UK GDP in the fourth quarter of 2011, following growth in each of the first three quarters.
But the OBR said the economy would avoid recession - technically defined as two successive quarters of negative growth - by expanding by 0.1% in the first three months of 2012.
Asked whether a move into negative growth would prompt a shift in the government's economic policies, Osborne said: "We will see ultimately what the numbers are.
"The policy mix we have set out is a loose monetary policy, very low interest rates, quantitative easing by the Bank of England, all supported by a credible budget policy convincing people around the world and in Britain that we can pay off our debts, plus structural reform to make our taxes competitive, to help young people into work and to build modern transport networks like High Speed 2.
"All these things are the right policy mix for Britain in what are undoubtedly very difficult world economic conditions, and a very difficult economy inheritance for Britain, as one of the biggest examples of a boom and bust economy."
Osborne said he believed that the government's economic policies would help the UK avoid a repeat of Japan's "lost decade" following a banking crisis and property market bubble in the 1990s.
"I think actually we are moving more quickly than Japan did 20 years ago to confront its problems," said the chancellor.
"When you look at the GDP numbers for Britain, they are very similar to the GDP numbers of France, Germany and other European countries."