The government has just announced a first quarter fall of 1.9% in GDP.
It is important to understand this. That is not an annual rate of decline. It means that on 1 April 2009 the total economy meausred as GDP was 1.9% smaller than it was on 1 January 2009.
So for Darling’s budget projection of 3.5% decline this year to be true, the average decline over the next three quarters would have to be about 0.5%. Given that we are still on an accelerating decline (the -1.9% quarter follows a -1.6% quarter) that is plainly very very unlikely indeed.
My own Treasury source tells me that they had expected a – 1.5% decline in the first quarter as part of their -3.5% projection for the full year. The Treasury did not have the 1.9% figure from the National Statistical Office in advance of the budget.
So plainly Darling’s – 3.5% figure is wrong. It is worth noting that the IMF came out two days later with the same prediction as me, – 4.1%.