The CEBR – Centre for Economics and Business Research, expects a shrink in the UK economy by almost 2.9% in the year 2009, which is more than any time ever since the 40s.

It also predicts a decline in the consumer spending and a slump in all forms of business investment. The forecasters also predict that the exporters will be helped by the fall in the pound’s value, however, their projection shall be held back by a global slowdown.

According to the CEBR’s research, the economy will contract by its biggest amount after the year 1946 where in the country was in the clutches of mass demobilisation after the wars. They also added that the economy is going through an agonizing readjustment as the consumers cut down on the spending because of ever increasing unemployment.

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A plan for economic recovery of EU member states has been proposed by the European Commission. European Commission is urging member states to sign up for this plan that aims to be coordinated across the European bloc by combining tax cuts and targeted investment.

The details about the plan have been unveiled on Wednesday and it may be of 130bn euros that is nearly one percent of EU states’ GDP.

EU has been asked to ease fiscal rules that may help the nations to spend more to strengthen their economies.

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To stabilize US economy and the financial system, the Federal Reserve has announced to offer another $800bn stimulus.

According to the US Treasury Secretary Henry Paulson, the package has been announced for the availability of more lending to consumers.

The new package will be used to buy mortgage-backed securities and thaw out the freezing consumer credit market.

US President-elect Barack Obama says: “Budget reform is essential because of the current economic crisis. And it’s not an option, but a necessity.”

Meanwhile Mr. Paulson said, “It would take some time to get out of these difficulties in US market and economy and we will have to face new challenges.”

“We are determined to handle these situations efficiently and use all the available tools to strengthen our financial institutions and stabilize financial markets.”

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Figures from the commerce Department show that between July and September, the US economy has shrunk at an annualized rate of 0.3%.

Though they showed the sharpest contraction of the economy since 2001, the gross domestic product (GDP) figures were better than expected. On the other hand, consumer spending that constitutes two-thirds of the US economy saw 3.1% shrinkage and it was the first contraction since 1991. This 0.3% shrinkage followed 2.8% growth during the last three-month period.

The figures related to shrinkage suggest that the US economy is halfway to the standard definition of a recession that shows two successive quarters of negative growth.

However, in the US the official definition is different and according to this definition the US economy is not officially in recession if the National Bureau of Economic Research doesn’t decide it.

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