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Increase in lending 'key to economic recovery'

Increase in lending 'key to economic recovery'

Category: Loans

Updated: 04/02/2009
First Published: 03/02/2009

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The government's economic priority should be to encourage banks to provide more secured and unsecured loans, it has been stated.

According to Jonathan Loynes, chief European economist at Capital Economics, measures already introduced are unlikely to prevent the recession from deepening further this year.

He noted that even if an increase in lending is achieved, the best that can be hoped for is the beginning of a recovery early in 2010.

But Mr Loynes added that the policy can be pursued without fear that over-reliance on credit is enhanced, as downward pressures mean this will not be an immediate problem.

"I think they can be pretty aggressive in trying to get banks lending and consumers borrowing and spending again without worrying about the next bubble starting to inflate," he remarked.

His comments come following an International Monetary Fund prediction that the UK's economy will experience a contraction of 2.8 per cent this year.

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