‘Known unknowns’ worry OBR chief
ROBERT Chote, the Government’s top economic forecaster has warned of the “disorderly disruptive outcome” a possible Greek exit from the euro would cause.
Addressing business leaders at a pro.manchester event yesterday, Mr Chote, chairman of the independent Office for Budget Responsibility said the situation in the euro zone is “the big risk” facing economic recovery,
In the wake of the revised-down GDP figures of a 0.3% contraction in the first quarter of this year, Mr Chote said he expects the economy to be “pretty flat” in the remainder of this year.
Paraphrasing former US Defense Secretary Donald Rumsfeld, he said the euro zone question was one of the “known unknowns” facing the UK, along with the impact of the Royal Jubilee holidays next month, the impact of the London Olympics this summer and inflation-related consumer confidence.
“Everyone is focused on possible Greek exit from the euro, and while the is not great economic links between the UK and Greece, if there is a disorderly disruptive outcome – it does raise the question of whether that threatens some sort of structural hit in the financial system and in the economy that we saw in the past recession.
“What we do really want to avoid is any impact to the smooth functioning of the financial system.”
Commenting on the Jubilee holiday, he warned of a “particularly volatile path for GDP growth” as the extra bank holiday will be cause economic activity to be shifted out of the second quarter.
He said the OBR was unsure whether there would be a positive impact on the economy, but it would also make the true picture on the health of the economy even more difficult to interpret.
Mr Chote, a former journalist with the Financial Times, trod a careful political line when quizzed on the suggestion from the International Monetary Fund that while the Government’s austerity measures are important, there may have to be some action to stimulate growth.
“The question regarding Plan A (austerity) and Plan B (some kind of measure to boost growth) is whether the loosening would be large enough to make a difference, and what the reaction of the markets will be.”
