GDP figures: a reaction round-up

"The government is failing to get public spending under control."

GDP fell 0.3 per cent in the last quarter of 2012. Although markets held relatively steady, the Sterling plummeted, and economists are warning that the UK is in danger of losing its AAA rating:

Charles Levy, senior economist at The Work Foundation:

Following three years of a flat economy, today's GDP figures confirm that our economy is again contracting, raising the prospect of a triple dip recession. 2012 saw considerable improvements in the labour market, with over half a million new jobs created, though many part-time. However, without growth even this improvement will be hard to sustain.

Mark Littlewood, Director General at the Institute of Economic Affairs:

These figures are clearly very disappointing. If the government does indeed have a strategy for growth, it plainly isn't working.

The government's independent forecaster had predicted the economy would be growing by about 2 per cent or 3 per cent by now. In fact, it is flatlining or even slipping backwards into a triple dip recession.

The government is failing to get public spending under control. This year alone, George Osborne will add £4,000 to the national debt for each and every British household. Far from a programme of austerity, the coalition are running up collossal budget deficits.

Andrew Goodwin, senior economic advisor to the Ernst & Young ITEM Club:

Today's GDP figures are right at the lower end of our expectations. The manufacturing and services figures came in pretty much where we expected them to but the construction outturn is very disappointing in the context of the monthly data that has already been published. Construction output must have collapsed in December to get such a small boost over the quarter as a whole.

The extraction sector also continues to exert a major drag. Where oil production was once a major support to UK activity, the sector is declining rapidly and the Q4 collapse means that output has now fallen by almost 40% over the past five years. This is having a significant impact on the GDP figures, the excluding oil measure is just over 2% short of previous peaks, in contrast to the 3.5% shortfall for GDP.

Nawaz Ali, UK Market Analyst for Western Union Business Solutions:

Britain's bigger-than-expected economic slump may now force the central bank to re-open its stimulus cupboard as soon as next month. Governor King may even reach for something unexpected in order to eliminate the risk of a triple-dip recession.

Meanwhile, Chancellor George Osborne could also bow to pressure from austerity-doves in his March budget update, but will also be well aware that Britain is now a step closer to losing its triple-A ratings crown.

The pound is falling sharply in global currency markets after the figures reinforced views that 2012 was a "lost year" for UK growth.

Frances O'Grady from the TUC:

Today's figures confirm our worst fears that the Chancellor's austerity plan has pushed the UK economy to the brink of an unprecedented triple-dip recession.

We are now mid-way through the coalition's term of office
and its economic strategy has been a complete disaster. The economy has grown by just 1%, real wages have fallen, and the manufacturing and construction sectors have shrunk. We remain as dependent on the City as we did before the financial crash.

ANDREY BORODULIN/AFP/GETTY IMAGES
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Letter from Donetsk: ice cream, bustling bars and missiles in eastern Ukraine

In Donetsk, which has been under the control of Russian backed rebels since April 2014, the propaganda has a hermetic, relentless feel to it.

Eighty-eight year-old Nadya Moroz stares through the taped-up window of her flat in Donetsk, blown in by persistent bombing. She wonders why she abandoned her peaceful village for a “better life” in Donetsk with her daughter, just months before war erupted in spring 2014.

Nadya is no stranger to upheaval. She was captured by the Nazis when she was 15 and sent to shovel coal in a mine in Alsace, in eastern France. When the region was liberated by the Americans, she narrowly missed a plane taking refugees to the US, and so returned empty-handed to Ukraine. She never thought that she would see fighting again.

Now she and her daughter Irina shuffle around their dilapidated flat in the front-line district of Tekstilshchik. Both physically impaired, they seldom venture out.

The highlight of the women’s day is the television series Posledniy Yanychar (“The Last Janissary”), about an Ottoman slave soldier and his dangerous love for a free Cossack girl.

They leave the dog-walking to Irina’s daughter, Galya, who comes back just in time. We turn on the TV a few minutes before two o’clock to watch a news report on Channel One, the Russian state broadcaster. It shows a montage of unnerving images: Nato tanks racing in formation across a plain, goose-stepping troops of Pravy Sektor (a right-wing Ukrainian militia) and several implicit warnings that a Western invasion is nigh. I wonder how my hosts can remain so impassive in the face of such blatant propaganda.

In Donetsk, which has been under the control of Russian-backed rebels since April 2014, the propaganda has a hermetic, relentless feel to it. If the TV doesn’t get you, the print media, radio and street hoardings will. Take a walk in the empty central district of the city and you have the creeping sense of being transported back to what it must have been like in the 1940s. Posters of Stalin, with his martial gaze and pomaded moustache, were taboo for decades even under the Soviets but now they grace the near-empty boulevards. Images of veterans of the 1941-45 war are ubiquitous, breast pockets ablaze with medals. Even the checkpoints bear the graffiti: “To Berlin!” It’s all inching closer to a theme-park re-enactment of the Soviet glory years, a weird meeting of propaganda and nostalgia.

So completely is the Donetsk People’s Republic (DPR) in thrall to Russia that even its parliament has passed over its new flag for the tricolour of the Russian Federation, which flutters atop the building. “At least now that the municipal departments have become ministries, everyone has been promoted,” says Galya, wryly. “We’ve got to have something to be pleased about.”

The war in the Donbas – the eastern region of Ukraine that includes Donetsk and Luhansk – can be traced to the street demonstrations of 2013-14. The former president Viktor Yanukovych, a close ally of Vladimir Putin, had refused to sign an agreement that would have heralded closer integration with the EU. In late 2013, protests against his corrupt rule began in Maidan Nezalezhnosti (“Independence Square”) in Kyiv, as well as other cities. In early 2014 Yanukovych’s security forces fired on the crowds in the capital, causing dozens of fatalities, before he fled.

Putin acted swiftly, annexing Crimea and engineering a series of “anti-Maidans” across the east and south of Ukraine, bussing in “volunteers” and thugs to help shore up resistance to the new authority in Kyiv. The Russian-backed rebels consolidated their power base in Donetsk and Luhansk, where they established two “independent” republics, the DPR and its co-statelet, the Luhansk People’s Republic (LPR). Kyiv moved to recover the lost territories, sparking a full-scale war that raged in late 2014 and early 2015.

Despite the so-called “peace” that arrived in autumn 2015 and the beguiling feeling that a certain normality has returned – the prams, the ice creams in the park, the bustling bars – missiles still fly and small-arms fire frequently breaks out. You can’t forget the conflict for long.

One reminder is the large number of dogs roaming the streets, set free when their owners left. Even those with homes have suffered. A Yorkshire terrier in the flat next door to mine started collecting food from its bowl when the war began and storing it in hiding places around the flat. Now, whenever the shelling starts, he goes to his caches and binge-eats in a sort of atavistic canine survival ritual.

Pet shops are another indicator of the state of a society. Master Zoo in the city centre has an overabundance of tropical fish tanks (too clunky to evacuate) and no dogs. In their absence, the kennels have been filled with life-size plastic hounds under a sign strictly forbidding photography, for reasons unknown. I had to share my rented room with a pet chinchilla called Shunya. These furry Andean rodents, fragile to transport but conveniently low-maintenance, had become increasingly fashionable before the war. The city must still be full of them.

The bombing generally began “after the weekends, before holidays, Ukraine’s national days and before major agreements”, Galya had said. A new round of peace talks was about to start, and I should have my emergency bag at the ready. I shuddered back up to the ninth floor of my pitch-dark Tekstilshchik tower block. Shunya was sitting quiet and unruffled in his cage, never betraying any signs of stress. Free from Russian television, we girded ourselves for the night ahead.

This article first appeared in the 05 February 2015 issue of the New Statesman, Putin's war