5 Sep

Pessimism based on wrong analysis, says economist

Pessimism based on wrong analysis, says economist

A former economic advisor to the government has said that the basis upon which many negative predictions about the economy are based is unjustified, something which could mean the prospects for the property market are better than believed in some quarters.

Some analysts have predicted a major recession in the UK and chancellor Alistair Darling recently stated in an interview with the Guardian that Britain is facing its biggest economic challenge in 60 years.

However, this analysis was disputed by Professor David Miles, an economic advisor to Morgan Stanley, the Daily Telegraph reported yesterday.

Suggesting that many surveys are overstating the extent of the economic downturn, he pointed out that interest rates are, unlike in the early 1990s, set to come down rather than go up - as was the case then - which means that "negligible rather than sustained negative growth" is more likely.

The early 1990s saw Britain keeping rates high to maintain the value of sterling against the German mark in the European Exchange Rate Mechanism.

Writing in the Independent, analyst Hamish MacRae stated that the economy will be boosted in coming months by a stronger export market due to the falling pound and is in a stronger overall state than in the early 1990s.

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