George Osborne has hinted that next week’s GDP figures could show negative growth for the final three months of last year.
The chancellor would not be drawn on making any specific predictions about Wednesday’s economic figures when he spoke to the BBC.
However, he reminded the interviewer that the Office for Budget Responsibility (OBR) had predicted a contraction in the UK’s economy for the last quarter of 2011.
Osborne’s response to the questions about the GDP figures will fuel talk that he is trying to “soften up” expectations before the statistics are released.
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“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,” said Osborne.
The OBR forecast a 0.1 per cent contraction in the UK’s GDP in the fourth quarter of last year in its Economic and Fiscal Outlook, which was published on the same day as Osborne’s Autumn Statement.
But it believes the economy will grow by 0.1 per cent in the first three months of this year and avoid going into recession, which is defined as two consecutive quarters of negative growth.
When asked if the government would consider changing its economic policies if the GDP figures showed negative growth, 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 dismissed concerns that the UK could suffer a “lost decade” akin to the one experienced in Japan during the 1990s after a banking crisis and its property market bubble burst.
“I think actually we are moving more quickly than Japan did 20 years ago to confront its problems,” said Osborne.
“When you look at the GDP numbers for Britain, they are very similar to the GDP numbers of France, Germany and other European countries.”