Darling admits that he was too optimistic about the recession

Earlier this month the Chancellor of the Exchequer, Alistair Darling, boldly admitted that his initial predictions about the ongoing recession that has gripped the UK were too optimistic. Darling said that he had underestimated the recession, which he had originally predicted would be over by the middle of this year. In an interview with a leading national newspaper, the chancellor simply said ‘It’s worse than we thought’.

This was the first admission by Darling with regards to just how wrong he and other government officials were when it came to the severity of the recession. At the interview Darling stated: ‘I thought we would see growth in the second part of the year. I think it will be the back end, turn of the year time, before we start seeing growth here.’

Following the recent G20 Summit, both the Prime Minister, Gordon Brown, and the President of the United States, Barack Obama, said that this was now a turning point for global economies. However, according to reports Darling is being far more cautious with his opinion as to whether the G20 Summit marked a turning point.

At the interview he was asked whether the worst was over for the economy in Britain, to which he replied: ‘I think there is some way to go yet. A lot really depends on actually how much other countries do. We have to be realistic about this. You cannot, you must not, build up false hope.’

It is thought that Britain will be amongst the hardest hit economies in terms of contraction over the course of this year, and already grim figures are beginning to hit the financial headlines. Figures that have been released with regards to official GDP figures have shown that the nation is certainly in a deeper recession that had originally been thought.

The figures even contradicted forecasts made by Darling in his recent budget, where he predicted that the economy would shrink by 3.5 percent over the course of the year, which was still higher than the 3 percent that many had thought he would forecast. However, based on the GDP figures the contractions is more likely to be in the region of 3.8-4.2 percent.

Sterling has also taken another hit as a result of these bleak figures, and one industry official said: ‘There’s a lot weighing on sterling, not least the Budget and fallout from concerns about the amount of gilt issuance. Of course the GDP figures aren’t helping. It’s really hard to tell any optimistic story on those data.’

He added that the United States is set to release GDP figures next week, and stated: ‘I think increasingly over the next few weeks currency markets will be focused elsewhere, their attention will be drawn to the US and the euro zone.’

One trader added: ‘These poor (GDP) figures are the nail in the coffin for the government’s “optimistic growth” forecasts, especially as they are coming on the back of speculation that the UK’s credit rating may be downgraded.’

Tags: chancellor, recession, Late 2000s recession in Europe, recent g20 summit, optimistic story, Late-2000s recession