But it’s a somewhat hollow victory. With the ongoing eurozone crisis, like a 350-pound heavyweight wrestler stuffed with brie, chorizo, tzatziki and ravioli, squashing GDP growth across the bloc, Britain rather wins by default. Even Germany, Europe’s economic powerhouse, is struggling to throw off the financial gloom. It is set to grow 0.7% this year, 0.5% in 2013 and 1.2% in 2014 against Britain’s 0.8% forecasted growth next year, and 1.4% for 2014.
The eurozone as a whole will continue to shrink by 0.4% in 2013 and 2014, says the Cebr report, hampered chiefly by ongoing contractions in the Italian and Spanish economies. France will keep shrinking for the next year or so too, but will manage an assez bon 0.2% growth in 2014.
The ongoing European recession is very bad news for everyone, including the UK, which counts the eurozone as its chief trading partner. ‘The economic situation in some parts of Europe is moving from bad to catastrophic,’ says Douglas McWilliams, chief executive of Cebr. ‘There is a danger that the economic problems will spill over into social breakdown in many areas of Europe as unemployment soars and governments run out of money.’
It’s not just uncertainty in the eurozone that is making it difficult to come up with accurate economic forecasts. In addition, the Middle East (or rather Middle Eastern oil supply) has become something of an economic free radical – any further disruption in these countries could have a knock-on effect on growth in our neck of the woods. If oil supply from the Middle East remains constant, however, then the price of oil should drop by about $5 per barrel.
In an attempt to take all these factors into account, Cebr has revised down its global growth forecast for economic output from 2.6% this year to 2.4%, and 2.7% next year to 2.5%. But all eyes will be on Europe over the coming months to ascertain if further downgrades will be necessary. ‘Even assuming that the problems of the euro do not cause an economic melt-down before the German elections next year. We are looking at a very weak economic outlook in Europe for the next two years,’ says Cebr senior economist Tim Ohlenburg.
Buckle up, Europe. We’re in for a bumpy ride.