RTTNews - The British economy is expected to return to growth in the second half of this year as it responds stimulus measures, the Bank of England policy maker Andrew Sentance wrote in an article for the Sunday Times newspaper. However, he added that there are uncertainties regarding the pace of recovery.
He noted that the extent to which constraints on bank lending will hold back spending and business activity and the uncertainty over the momentum of recovery across the global economy makes the prediction for the British economy blurred.
Further, he said the prospects for global recovery depend on whether Asia can become a true engine of global growth, not simply by meeting demand originating in America and Europe but propelled by consumer spending and investment in this key region that is home to 60% of the world's population.
Because Asian economies are looking to export markets for growth, they are not able to provide an alternative engine for the world economy. In this scenario, growth is likely to disappoint at home and abroad, he said. UK inflation will tend to remain below target, justifying a prolonged period of loose monetary policy.
However, recent growth trends in Asia also raise the prospect of a second scenario in which the recovery from the confidence shock to the global economy creates a stronger and more sustained momentum of growth, Sentance wrote.
Further, he said the recovery in some over-indebted economies- notably America - may be subdued, but consumption and investment in economies less directly affected by these problems - notably China, India and other Asian economies - provide an alternative engine of demand that can get the global economy moving.
Moreover, he said if the world economy logs a stronger growth and if there are inflationary pressures, monetary authorities would need to tighten policy more quickly.
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