Britain avoided falling into a third recession since the 2008 global financial crisis after its economy grew by a better-than-expected 0.3 percent in the first quarter compared with the final three months of last year, official data showed Thursday.
In a significant boost to Prime Minister David Cameron’s coalition government, gross domestic product (GDP) “increased by 0.3 percent in Q1 2013 compared with Q4 2012″ when the British economy had contracted 0.3 percent, the Office for National Statistics (ONS) said in a preliminary estimate.
The technical definition of recession is two quarters running of contracting economic activity.
“Today’s figures are an encouraging sign the economy is healing,” British finance minister George Osborne said in response to the data.
“Despite a tough economic backdrop, we are making progress,” the chancellor of the exchequer added in a statement.
The positive GDP figure comes after Fitch last week stripped Britain of its top triple-A rating, moving it down one notch to ‘AA+’ amid fears that the government’s austerity programme was hurting economic recovery.
“By posting a 0.3-percent quarterly expansion in the first quarter, the UK has managed to avoid a triple-dip recession,” said Vicky Redwood, economist at Capital Economics research group.
“This will be a relief for Mr Osborne and the rise was also better than the 0.1-percent increase expected by the consensus.”
The ONS added that Britain’s economy expanded by 0.6 percent in the January-March period compared with the first quarter of 2012.
Meanwhile, the International Monetary Fund, IMF, has urged European nations to implement “crucial reforms” to overcome the eurozone debt crisis, generate economic growth and avoid stagnation.
IMF First Deputy Managing Director David Lipton, speaking in central London, also praised “important steps” taken by eurozone governments to combat the region’s long-running crisis.
However he added that there are “crucial reforms that Europe still needs to adopt if it is to place the crisis in the rearview mirror and finally return to growth and job creation. That process is by no means assured, but it is attainable.”
Lipton noted that the IMF’s baseline scenario saw a continued recession in the 17-nation euro area this year, before a return to modest growth of about 1.0 percent in 2014, but warned that risks remained.
Europe lags behind the United States in a “three-speed” recovery that is spear-headed by emerging and developing nations.
“There is … a risk that Europe could fall into stagnation, which would have very serious implications for households, companies, banks, and other bedrock institutions,” Lipton said.
“So, to decisively avoid that dangerous downside, policy makers must act now to strengthen the prospects for growth.”
His comments came on the same day that official data showed that Spanish unemployment had soared to a record high level of 27.16 percent as a deep recession ravaged the eurozone’s fourth-largest economy.
Lipton said that European countries needed to ensure the sustainability of their public finances, and also make their fiscal policy “growth-friendly”.
Some nations, particularly in southern Europe, needed to introduce labour and product market reforms to boost their medium-term growth prospects, the IMF official said.