UK, Germany and Spain to Fall into Recession

The European Commission has predicted that three countries will experience two negative quarters of economic growth in a row. This effectively means that they will go into recession.

The Commission also believed that economies in the 15 nation Euro bloc would only grow by 1.3% this year, against previous projections of 1.7%. The slowdown was driven by a decline in exports and consumer spending.

Gloomy outlook

Due to a stagnant housing market and volatile financial markets, the Commission predicts that the UK economy, which is not a member of the Eurozone, will contract by an annual rate of 0.2% in each of the next two quarters. A second quarter of negative growth is also expected in the German and Spanish economies, which are projected to shrink by 0.2% and 0.1%, respectively.

The gloomy news mirrors forecasts from the Organisation for Economic Cooperation and Development (OECD) released earlier this week, which were even more pessimistic. According to the latest official figures, the UK economy did not grow at all in the second quarter of 2008.

The European Commission stated that the UK economy would grow by only 1.1% in 2008. This is appreciably less than the 1.7% previously forecast, and well below the official UK Treasury forecast of 2.5%.